Govt eases FDI norms for China, other nations sharing border with India

The Union Cabinet on Tuesday approved easing foreign direct investment (FDI) norms for countries sharing land borders with India, including China, amending provisions introduced under Press Note 3 of 2020, according to information.The decision was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi.Under the earlier rules introduced in 2020, companies from countries sharing land borders with India—or those with beneficial ownership in such countries—were required to seek mandatory government approval before investing in any sector in India. The norms were tightened following heightened geopolitical tensions and security concerns.The restrictions applied to investors from seven neighbouring countries—China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.
The tightened investment rules were introduced after relations between India and China deteriorated following the deadly clash between troops of the two countries in the Galwan Valley in June 2020, one of the most serious military confrontations between the two sides in decades.Following the incident, India also banned more than 200 Chinese mobile applications, including TikTok, WeChat and UC Browser, citing security concerns.
Despite the restrictions, Chinese investment has accounted for only a small portion of India’s total foreign direct investment inflows. Government data shows that between April 2000 and December 2025, China ranked 23rd among investing countries in India, contributing around $2.51 billion, or 0.32 per cent of total FDI equity inflows.However, bilateral trade between the two countries has continued to expand significantly, with China emerging as India’s second-largest trading partner.In FY25, India’s exports to China declined 14.5 per cent to $14.25 billion from $16.66 billion in the previous year. Imports from China, however, rose 11.52 per cent to $113.45 billion from $101.73 billion, widening the trade deficit to $99.2 billion.During April–January of FY26, India’s exports to China increased 38.37 per cent to $15.88 billion, while imports rose 13.82 per cent to $108.18 billion, leaving the trade deficit at $92.3 billion.