India mulls easing trade, investment curbs on China amid US tariff tensions: Report

Notably, India-China trade ties remain strong despite restrictions.

New Delhi is reportedly considering relaxing trade and investment restrictions imposed on China after the 2020 Galwan clash, amid a thaw in border tensions and increasing pressure from the US on tariff reductions.

According to sources cited in an Indian Express report, discussions are underway to relax visa restrictions for Chinese personnel, lift some tariff and non-tariff barriers, and allow certain banned Chinese apps. Proposals also include resuming flights and granting visas to Chinese scholars, further states the report. The Narendra Modi government is reportedly deliberating over easing its 2020 policy that requires approval for investments from bordering nations, enabling controlled Chinese investments to negate the widening trade deficit.

Moneycontrol could not independently verify the report.

Notably, India-China trade ties remain strong despite restrictions. In FY24, bilateral trade stood at $118.4 billion, with China surpassing the US as India’s top trading partner. However, the trade deficit with China has continued to widen, reaching over $83 billion in 2023. Indian exports face significant non-tariff barriers in China, particularly in agriculture and pharmaceuticals.

As per officials cited in the abovementioned report, strengthening economic ties with Beijing will likely serve as a hedge against Washington’s trade demands. The Finance Ministry has reportedly made a presentation advocating for easing restrictions.

Easing non-tariff barriers, including mandatory Bureau of Indian Standards (BIS) certification on Chinese electronic and IT products, is also under consideration, it has been learnt from the Indian Express report. Additionally, visa policies for Chinese workers in infrastructure projects are expected to be relaxed, reversing tighter scrutiny introduced in recent years.

China has expressed interest in restoring trade ties, proposing investment flows to India. A gradual opening may involve joint ventures where Chinese firms hold minority stakes. Recent deals, such as SAIC Motors’ divestment in MG Motors and Shein’s return via Reliance Retail, indicate a cautious middle-ground approach.

As per a NITI Aayog report, India has had limited success in attracting firms seeking alternatives to China. Policymakers are now considering ways to balance domestic industry protection with economic pragmatism in engaging with Beijing.