<p>The Union Cabinet’s decision to ease restrictions on Foreign Direct Investment (FDI) from China underlines India’s renewed efforts to boost manufacturing in specified sectors. The move revokes an April 2020 amendment through Press Note 3 (PN3) that restricted investment from countries with which India shares a land border. </p><p>Through the amendment, the government stipulated that investments from land border countries (LBCs) in India can only be done under the government route. While the stated objective was to prevent “opportunistic” takeover or acquisition of Indian companies during the Covid-induced crisis, the move also kept Chinese capital away after the deadly Galwan clash in June 2020.</p>.Government eases FDI norms for China, other countries sharing land border with India.<p>There was strategic and political rationale in reducing engagement with China following the border flare-up. But the world has changed over the six years since the clash and has witnessed major economic and geopolitical shifts. China enjoys primacy in manufacturing, with proven prowess in critical areas such as electronics. It controls the supply chains of many components critical to the modern economy. </p><p>For India to power its manufacturing ambitions, it needs to establish its presence in the global supply chains. A policy that promotes better economic and business relations with China is in the country’s interest. Bilateral trade has grown steadily even after the Galwan standoff, though the equation favours China. Diplomatic ties have improved. Prime Minister Narendra Modi visited China in August-September 2025. In October, direct flights between the two countries resumed after a five-year break, further signalling a thaw in ties.</p>.<p>India has a strong case to improve its FDI inflows, considering the uncertainties that prevail around its trade and economic relations with the United States. According to the new guidelines, investors with non-controlling LBC beneficial ownership of up to 10 per cent are allowed through the automatic route, subject to conditions. Entities from LBCs wishing to invest in specific sectors will have their proposals processed and decided within 60 days. Other provisions in the amended policy, too, clear the way for easier investment by Chinese companies. </p><p>The move is expected to reset the situation, significantly improving the ease of doing business. These amendments come at a time when India remains locked in standoffs with China on multiple fronts. The two countries have unresolved differences and India has raised concerns over China’s conduct. While closer economic ties are necessitated by geopolitical interests, these relaxations must be seen as independent of policies that steer India’s strategic engagement with its neighbour.</p>
<p>The Union Cabinet’s decision to ease restrictions on Foreign Direct Investment (FDI) from China underlines India’s renewed efforts to boost manufacturing in specified sectors. The move revokes an April 2020 amendment through Press Note 3 (PN3) that restricted investment from countries with which India shares a land border. </p><p>Through the amendment, the government stipulated that investments from land border countries (LBCs) in India can only be done under the government route. While the stated objective was to prevent “opportunistic” takeover or acquisition of Indian companies during the Covid-induced crisis, the move also kept Chinese capital away after the deadly Galwan clash in June 2020.</p>.Government eases FDI norms for China, other countries sharing land border with India.<p>There was strategic and political rationale in reducing engagement with China following the border flare-up. But the world has changed over the six years since the clash and has witnessed major economic and geopolitical shifts. China enjoys primacy in manufacturing, with proven prowess in critical areas such as electronics. It controls the supply chains of many components critical to the modern economy. </p><p>For India to power its manufacturing ambitions, it needs to establish its presence in the global supply chains. A policy that promotes better economic and business relations with China is in the country’s interest. Bilateral trade has grown steadily even after the Galwan standoff, though the equation favours China. Diplomatic ties have improved. Prime Minister Narendra Modi visited China in August-September 2025. In October, direct flights between the two countries resumed after a five-year break, further signalling a thaw in ties.</p>.<p>India has a strong case to improve its FDI inflows, considering the uncertainties that prevail around its trade and economic relations with the United States. According to the new guidelines, investors with non-controlling LBC beneficial ownership of up to 10 per cent are allowed through the automatic route, subject to conditions. Entities from LBCs wishing to invest in specific sectors will have their proposals processed and decided within 60 days. Other provisions in the amended policy, too, clear the way for easier investment by Chinese companies. </p><p>The move is expected to reset the situation, significantly improving the ease of doing business. These amendments come at a time when India remains locked in standoffs with China on multiple fronts. The two countries have unresolved differences and India has raised concerns over China’s conduct. While closer economic ties are necessitated by geopolitical interests, these relaxations must be seen as independent of policies that steer India’s strategic engagement with its neighbour.</p>
