Govt eases FDI norms for China, other countries sharing land border with India: Sources

Due to heightened scrutiny in recent years, China accounts for a relatively small share of India’s total FDI inflows

• India eases FDI norms for countries sharing land borders
• Press note 3 of 2020 amended to relax investment approval rules
• China is still India's 2nd-largest trading partner despite tensions

Did our AI summary help?

The Union Cabinet on Tuesday eased foreign direct investment (FDI) norms for countries sharing land borders with India, including China, sources told PTI, amending the provisions introduced under Press Note 3 of 2020.

The decision was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi.

Under the earlier rule, companies from countries sharing land borders with India—or those with beneficial ownership in such nations—were required to seek mandatory government approval before investing in any sector in India.

The rule applies to seven neighbouring countries: China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

Due to heightened scrutiny in recent years, China accounts for a relatively small share of India’s total FDI inflows. Data shows that between April 2000 and December 2025, China ranked 23rd among investing nations, contributing $2.51 billion—just 0.32% of the total FDI equity inflows into India.

Relations between the two countries deteriorated sharply after the violent clash in the Galwan Valley in June 2020, which marked the most serious military confrontation between the two sides in decades.

Following the incident, India tightened investment rules and banned more than 200 Chinese mobile applications, including TikTok, WeChat and Alibaba’s UC Browser.

However, while Chinese FDI into India has remained limited, bilateral trade between the two countries has continued to expand significantly. China has emerged as India’s second-largest trading partner.

In FY25, India’s exports to China fell 14.5% to $14.25 billion from $16.66 billion in FY24. Imports, however, rose 11.52% to $113.45 billion from $101.73 billion during the same period, widening the trade deficit to $99.2 billion from $85 billion.

Between April and January of FY26, India’s exports to China rose 38.37% to $15.88 billion, while imports increased 13.82% to $108.18 billion, leaving the trade deficit at $92.3 billion.