India may ease Chinese FDI rules as relations with Beijing improve

Press Note 3 could be reviewed as NITI Aayog backs ending mandatory prior approval for investments from China

India signals policy shift on Chinese FDI

 

India is open to easing restrictions on foreign direct investment (FDI) from China, a senior government official has indicated, amid signs of improving diplomatic ties between New Delhi and Beijing.

 

The official said that Press Note 3, which currently mandates prior approval for investments from countries sharing land borders with India, could be reconsidered if needed. “All options are open,” the source was quoted as saying by The Economic Times.

NITI Aayog backs rollback of restrictions

• Last month, NITI Aayog recommended removing prior approval for FDI up to 24 per cent from Chinese entities.

 

• It argued that the current system, which requires security clearance from both the home and foreign ministries, is delaying several large deals.

 

• The think-tank called for streamlined procedures, especially where risks are low, to avoid holding back strategic economic opportunities.

Modi–Xi diplomacy and improving ties

• India and China have resumed high-level engagements, including ministerial visits and talks on tourism, trade and border issues.

 

• Chinese Foreign Minister Wang Yi visited India recently, agreeing to facilitate rare earth and fertiliser supplies.

 

• External Affairs Minister S Jaishankar travelled to Beijing this month—his first visit in six years—meeting President Xi Jinping.

 

• PM Modi is expected to attend the SCO Summit in China from August 31–September 1, where he will meet Xi on the sidelines.

Backdrop: US tariffs, strategic recalibration

 

India’s review of its FDI policy on China comes just as US President Donald Trump imposed 50 per cent tariffs on Indian goods, while leaving China largely untouched.

 

This has triggered speculation that India may seek to recalibrate trade ties to balance its strategic risks.

What is Press Note 3?

Introduced in April 2020 after border tensions, Press Note 3 requires prior government approval for FDI from neighbouring countries.

 

The rule was intended to prevent “opportunistic takeovers” during the pandemic, particularly by Chinese firms.

Govt signals evolving approach

 

Commerce Minister Piyush Goyal has previously defended the rule but hinted at flexibility. “The decision reflected the strategic context at that time,” he said. “But as times change, so must our decisions.”