India needs to further relax the inflows of investment and trade from China to boost economic growth and enhance exports, says Nisha Taneja, Senior Visiting Professor at the Indian Council for Research on International Economic Relations (ICRIER).
Chinese imports had been restricted since April 2020 under Press Note 3, to prevent “opportunistic takeovers” of Indian companies. But on March 10th, the government significantly revised it.
“India now allows up to 10 per cent equity through the automatic route without any approval of the government. So, 10 per cent is quite a small amount that is being permitted through the automatic route,” said Taneja, arguing that “NITI Aayog had suggested 24 per cent and ICRIER had suggested in our report 49 per cent equity through the automatic route.
“But it’s a good step. It’s a starting step. And we hope to see that these limitations will be eased even further as we go along, and hopefully not with such a long time gap,” Taneja told StratNews Global during an interview.
She said since India is unable to address the ballooning trade deficit with China, it is imperative for New Delhi to open the doors for Chinese capital to flow into the country to offset the trade imbalance.
India’s trade deficit with China crossed the $100 billion mark for the first time in history during the 2025-26 financial year. The deficit reached approximately $102.1 billion for the April-February period of FY 2025-26, according to official data released by the Ministry of Commerce and Industry.
“The Chinese deficit alone accounts for 35 per cent of our total deficit. That’s huge. So the fact is that we are very dependent on Chinese imports. And in that context, it becomes really very important to have a larger FDI (foreign direct investment) inflow into India. And they’ve been really meagre,” Taneja added.
In August 2025, ICRIER released a report that suggested amending Press Note 3 in order to allow greater Chinese investments into India. The report also suggested “security guardrails” to be put in place in order to deal with the strategic challenges that continue to bog down the bilateral relationship with Beijing.
“The (FDI) flows come with not just capital, they come with technology transfer, they come with management practices, they come with other spillovers – larger employment opportunities. So, in that sense FDI is far more and far better than just depending on trade.”
On March 20, the government decided to resume border trade between India and China through the Lipulekh Pass in Uttarakhand’s Pithoragarh district after a six-year hiatus.
“From an economist’s point of view, whether there was a Galwan or no Galwan, we were still importing from China. But why were we not being able to export. And clearly, the signals that are going down to the exporters today are not very positive. So the messaging and the signalling to our own exporters is also needed,” Taneja said.
She believes that India should revisit its decision to walk out of the Regional Comprehensive Economic Partnership (RCEP) – the world’s largest free trade agreement. The RCEP trade bloc currently has 15 countries accounting for 30 per cent of global GDP.
“Whether there was a Galwan or no Galwan, imports continued to take place. So we are only harming our own investments in India. We are harming our own exports to China. So there has to be a balance somewhere. And Press Note 3 cannot be used as a weapon because you are harming yourselves. Business relationships should be with all countries, including China,” Taneja said.
She added, “That’s the larger point that we can’t exclude China from any economic engagement. If anything, China is a very important partner. So we have to continue to engage with China.”
According to Taneja, now that India has signed free trade agreements with the United Kingdom, the European Union and Australia, New Delhi should now also consider joining RCEP.
“We should definitely now consider RCEP and not let it linger, because again, we are giving the wrong signals. So it’s absolutely important that we become members of the RCEP,” she said.
“We forget that RCEP will actually give us market access. So we need to be playing offensive and not just be defensive all the time. So we need to be aggressively pushing our exports as well,” she said, adding that India can export items like bovine meat, pharmaceuticals and gems and jewellery, among others.
“So while the Chinese are aggressively pushing their exports to the entire world, we are not able to understand what the requirements are of the Chinese market. And again, RCEP would open all these doors for us. So we must look at what opportunities we have through RCEP.”
