India Eases Restrictions on Chinese Investments in Select Sectors
India has approved easing restrictions on Chinese investments in certain sectors, signaling a potential reset in economic ties after six years of strained relations. Prime Minister Narendra Modi’s cabinet cleared changes to foreign direct investment (FDI) rules that had restricted investments from China and other neighbouring countries since 2020. Under the revised policy, Chinese investments will be permitted in sectors such as electronics, capital goods, and solar cell manufacturing, aiming to address capital shortages and support industrial growth.
India had tightened scrutiny on Chinese investments following deadly border clashes in 2020 along the Himalayan frontier, which resulted in the deaths of 20 Indian and four Chinese soldiers. Since then, investments from Chinese companies required security clearance from a government panel involving the home and foreign ministries. The restrictions had stalled several proposals, including a 2023 plan by Chinese electric vehicle maker BYD to invest $1 billion in a joint venture in India.
Industry groups had long urged the government to relax the curbs, arguing that manufacturers dependent on Chinese technology and capital faced delays in projects and supply chains. India’s policy think tank NITI Aayog had also recommended allowing Chinese firms to hold stakes of up to 24% in Indian companies without prior approval. The policy shift comes amid global supply chain realignments and efforts to reduce India’s growing trade deficit with China, which reached $99 billion in FY25, largely driven by imports of electronics, components, and machinery.
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