New Delhi: Commerce and Industry Minister Piyush Goyal Tuesday said India-China relations are gradually moving towards normalcy, noting that as border issues get resolved, easing of tensions is a natural consequence.
At the meeting held on the margins of the Shanghai Cooperation Organisation (SCO) summit, Modi and Xi agreed to work towards a “fair, reasonable and mutually-acceptable” solution to the India-China border issue, and pledged to expand trade and investment ties, recognising the role of the two economies to stabilise global trade.
“This was an SCO summit, where all the SCO members participated. We had a problem in Galwan, due to which we had a blip in the relationship. As the border gets resolved, I think the situation getting back to normal is a very natural consequence,” Goyal told reporters when asked if with India and China resetting their relationship and if there is a scope for relaxations in PN3.
At present, Foreign Direct Investment (FDI) applications from countries sharing land borders, such as China, have to mandatorily seek government approval for all sectors. This policy was issued in April 2020 as Press Note 3 (PN3).
The domestic industry is urging the government to ease these FDI norms to attract more investments from China.
In July 2024, the pre-budget Economic Survey made a strong case for seeking foreign direct investments from Beijing to boost local manufacturing and tap the export market.
It said that increased overseas inflows from the neighbouring countries can help increase India’s global supply chain participation and push exports.
China stands at 23rd position with only 0.34 per cent share (USD 2.5 billion) in total FDI equity inflow reported in India from April 2000 to March 2025.
The ties between the two countries nosedived significantly following the fierce clash in the Galwan Valley in June 2020 that marked the most serious military conflict between the two sides in decades.
Following these tensions, India had earlier banned over 200 Chinese mobile apps such as Tiktok, Wechat, and Alibaba’s UC browser. The country has also rejected a major investment proposal from EV maker BYD.
Experts are suggesting the government to have a re-look at PN3, which subjects investments to additional scrutiny even if there is a single shareholder from China.
The experts have also suggested that the committee which oversees investment proposals under this press note should be asked to expeditiously clear the FDI proposals from the land border countries, including China.
There is an inter-ministerial committee headed by the Home Secretary to consider applications under that press note.
Though India has received minimal FDI from China, the bilateral trade between the two nations has grown multi-fold.
In 2024-25, India’s exports stood at USD 14.25 billion, while imports were USD 113.5 billion.
Trade deficit (difference between imports and exports) rose from USD 1.1 billion in 2003-04 to USD 99.2 billion in 2024-25.
China’s trade deficit accounted for about 35 per cent of India’s total trade imbalance (USD 283 billion) in the last fiscal. The gap was USD 85.1 billion in 2023-24.
PTI
