India Eases FDI Norms Amid Growing Trade with China

The Indian government has amended its foreign direct investment norms, easing restrictions on countries sharing land borders with India, including China. This decision comes as trade between the two countries continues to grow despite past tensions, such as the Galwan Valley clash.

The Indian government announced on Tuesday a relaxation of foreign direct investment (FDI) norms applicable to nations sharing land borders with India, notably China. Sources revealed that Press Note 3 of 2020 has been amended following a Union Cabinet meeting led by Prime Minister Narendra Modi.

This amendment requires foreign entities with shareholders from these nations to obtain mandatory governmental approval for completing investments in India across any sector. Despite limited FDI from China, bilateral trade has significantly expanded, positioning China as India's second-largest trading partner.

Trade data highlights a contraction in India's exports to China for the fiscal year 2024-25, yet an increase in imports, leading to an expanded trade deficit. However, recent figures from 2025-26 indicate a resurgence in export volume, underscoring a complex but dynamic trading relationship.

(With inputs from agencies.)