India, which had reduced imports from its neighboring country China, boycotted its products and even stopped flights, has now given relief to China in Foreign Direct Investment (FDI). By making changes in Press Note No. 3 of the year 2020, the government has brought such rules in which investments can be made in India even from countries like China. This relief has been given for some businesses related to manufacturing sector. Investment requests coming from these companies will be approved within 60 days. This decision is in discussion because due to the tensions between India and China in the last few years, the situation had become such that an appeal was made to boycott Chinese products.
In the last few months, many decisions of the Indian government have given relief to China. Now the new decision was to give relief in FDI. Earlier, there was a rule that if people from countries sharing border with India were shareholders in a foreign company, then it was mandatory for them to take permission from the government before investing. This includes China, Bangladesh, Pakistan, Nepal, Bhutan, Myanmar and Afghanistan. Interestingly, this relief has now been given in cases like rare earth material also. Now according to the new rules, the government has decided that investors from these countries can also invest in companies to acquire 10 percent stake. It just has to be seen as to what percentage of foreign investment can be made in which sector.
How dependent is India on China?
These days, India, which is emphasizing on manufacturing of electronic items, is still importing a lot of things related to this industry. Every year India imports electronic components, batteries, diodes etc. worth about Rs 3 lakh crore from China. Apart from this, about Rs 2 lakh crore of components of computers, water pumps and ACs are imported. In the case of medicines, many Indian pharmaceutical companies are still dependent on Chinese APIs. Every year, pharma products worth about Rs 1 lakh crore are imported. Similarly, plastic items, fertilizers, iron and steel, auto parts, furniture and other things are imported extensively.
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Similarly, Indian businessmen sell iron ore, chromium ore, petroleum products and many pharmaceutical products to China. China is useful for Indian businessmen as a market for machinery, fish and other marine products. China is a big market for Indian businessmen to sell clothes, spices and electronic equipment.
Industry of India Raw material of China
There are many industries in India for which the raw material comes from China. India, which is counted among the largest drug producers in the world, gets 70 percent of its APIs (Active Pharmaceutical Ingredients) from China. More than 30 percent of the components for making electronic equipment are obtained from China. Similarly, more than one-third of the raw materials of the automobile sector comes from China. Also, companies in the textile and leather sector get 40 percent of their raw materials from China.
India has progressed rapidly in mobile manufacturing and gets its raw materials from China only. Similarly, the raw material for making plastic items also comes from China. From tempered glass for mobile phones to making liquor bottles and glasses, glass material comes from China only.
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This is the reason why India and China cannot maintain distance from each other even if they want to. All the industries in India are dependent on Chinese raw materials. At the same time, India is a huge market for Chinese businessmen. India is a huge market for everyone from small businessmen to big industrialists.
What is India’s concern?
The trade of both the countries is continuously increasing. In the year 2025, the trade between the two countries will reach approximately $155. India purchased a total of $135.87 billion worth of goods from China but China purchased only $19.75 billion worth of goods from India. That means India spent 116.12 billion dollars more. This is called trade deficit. This means that India is at a loss in this business of both the countries.
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How did India-China relations develop and deteriorate?
2017- There was a fierce conflict between India and China in Doklam.
2018- PM Modi went to Wuhan (China) and met Chinese President Xi Jinping.
2019- Xi Jinping attended India and Chennai Connect conference.
2020- There was a bloody conflict between the soldiers of India and China in Galwan Valley in which soldiers of both the countries were killed.
May-June 2020- There was a conflict between the two countries over Ladakh and relations deteriorated. Meanwhile, demand arose for boycott of Chinese goods. PM Modi himself demanded boycott of foreign goods several times.
2021- Talks continued between the two countries regarding Pangong but did not yield any result.
2022- There was a clash between the soldiers of India and China in Tawang Valley.
2023- A few rounds of talks took place but there was no result.
2024- India relaxed visa rules for Chinese engineers.
2024- At the end of the year, both countries agreed to return to their original positions.
2025- Prime Minister Modi went to China to attend the SCO conference. China became India’s largest trading partner in August 2025.
February 2026- Trade between the two countries reaches US $ 155 billion.
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