India-China Economic Relations
Investment, Trade, and the 'Decoupling vs. Engagement' Debate
India and China are each other's large trading partners despite unresolved border tensions (following the 2020 Galwan Valley clash and Line of Actual Control standoffs). India's merchandise trade deficit with China has consistently been among the largest bilateral deficits globally.
- India-China bilateral trade stood at approximately $118 billion in FY2023-24, with India running a deficit of about $85 billion.
- Direct Chinese FDI into India has remained relatively small (less than $3 billion cumulatively), but indirect exposure through third-country intermediaries is far larger.
- The 2020 ban on hundreds of Chinese mobile apps and stricter FDI screening reflected India's post-Galwan securitisation of the economic relationship.
- The 2026 FDI relaxation signals a pragmatic recalibration: India seeks to attract manufacturing investment from global companies (e.g., in electronics, semiconductors, EVs) that happen to have some Chinese capital, without opening the door to direct Chinese state-linked investment.
- This is relevant to India's Production Linked Incentive (PLI) Scheme aspirations in sectors like electronics, where global supply chains inevitably involve some China-linked capital.
● Tracked since March 11, 2026 · last seen May 04, 2026 · updates as the daily brief publishes
See it in today’s brief.
Daily current affairs with every static concept explained in place.
Read the daily brief