India’s balancing act to attract more investment from China, U.S. and boost trade
India has made gradual, incremental relaxations to long-held foreign investment and trade-defence policies over the past year.
Changes include easing restrictions on FDI from entities linked to countries sharing a land border with India (including China), adjustments to e-commerce FDI norms, and stepped-up anti-dumping action against underpriced imports.
The recalibration comes as India's goods trade deficit with China has widened past $100 billion for the first time in a financial year, while trade and tariff negotiations with the United States remain unresolved.
The approach reflects an attempt to keep manufacturing supply chains open to Chinese capital and components (needed for electronics and clean-energy manufacturing) while protecting domestic industry and hedging against overreliance on any single trade partner.
Press Note 3 (2020) and Its 2026 Amendment
Press Note 3 of 2020 was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on 17 April 2020, amending India's Foreign Direct Investment (FDI) policy and the FEMA Non-Debt Instruments Rules to require prior government approval for any investment — direct or indirect, and regardless of sector or amount — originating from an entity based in a country sharing a land border with India, or where the beneficial owner is situated in or is a citizen of such a country. It affected seven neighbours: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan. It was introduced as a safeguard against opportunistic takeovers of India firms during the COVID-19 market downturn, roughly a month before the 2020 Galwan Valley clash.
Key Details
- Issued 17 April 2020 by DPIIT under the FDI Policy / FEMA (Non-Debt Instruments) Rules, 2019.
- Government approval route mandatory for all land-border-country FDI, irrespective of sector or investment size, since 2020.
- The Union Cabinet approved amendments to Press Note 3 in March 2026: non-controlling investments below a 10% ownership/economic-interest/control threshold from land-border-country investors can now proceed via the automatic route, subject to sectoral caps and conditions. The 10% threshold is modelled on the "beneficial owner" concept used in the Prevention of Money Laundering Act, 2002.
- Investments above the 10% threshold, or in sensitive sectors, continue to require government approval.
The 2026 Press Note 3 amendment is the specific regulatory mechanism behind the "gradual relaxation" of FDI policy toward China referenced in the news — it does not remove screening altogether but narrows it to controlling/near-controlling stakes.
Anti-Dumping Duty Mechanism (Trade Remedies)
Anti-dumping duties are trade-defence measures imposed when a country's exporters sell goods in another market below their normal (home-market) value, causing material injury to the importing country's domestic industry. The mechanism derives from Article VI of the General Agreement on Tariffs and Trade (GATT) and is elaborated by the WTO Agreement on Implementation of Article VI (the WTO Anti-Dumping Agreement, in force since 1 January 1995).
Key Details
- In India, the domestic legal basis is Sections 9A-9C of the Customs Tariff Act, 1975, operationalised via the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995.
- Investigations are conducted by the Directorate General of Trade Remedies (DGTR), a single-window trade-remedy authority under the Ministry of Commerce and Industry, established in 2018 (merging the erstwhile Directorate General of Anti-Dumping and Allied Duties with safeguards and countervailing-duty functions); final duty imposition is notified by the Ministry of Finance/CBIC.
- De minimis thresholds: an investigation is not initiated if dumped imports from a single country are below 3% of total imports of that product into India, or below 7% collectively for multiple countries each individually under 3%.
- Anti-dumping duties are distinct from countervailing duties (which offset foreign government subsidies) and safeguard duties (which address a general surge in imports, not unfair pricing).
Anti-dumping action against underpriced imports (frequently from China, in sectors like steel and chemicals) is the trade-defence lever India is using in parallel with FDI liberalisation — opening the investment door while keeping a tariff-based check on underpriced goods.
FDI Regulatory Architecture: Automatic Route vs Government Route
India's FDI policy, framed by DPIIT and operationalised through FEMA, channels inbound investment through two routes. Under the automatic route, a non-resident investor or Indian company does not need prior approval from the Government or the RBI, only post-facto filings. Under the government route, prior approval from the concerned administrative ministry/department (via the Foreign Investment Facilitation Portal) is mandatory before the investment is made.
Key Details
- Sectoral FDI caps and route (automatic/government) are notified sector-wise in the Consolidated FDI Policy Circular, updated periodically by DPIIT.
- E-commerce: 100% FDI is permitted under the automatic route only in the "marketplace model" (B2B/platform), not in the "inventory-based model," where a single entity controls inventory sold on its own platform.
- Land-border-country investments were moved entirely to the government route in 2020 (Press Note 3) and partially restored to the automatic route in 2026 for sub-10% non-controlling stakes.
The described relaxations in e-commerce and China-linked FDI are both instances of the same underlying policy tool — shifting specific categories of investment between the automatic and government routes.
- India's goods trade deficit with China: crossed $100 billion for the first time in April 2025-February 2026 (reported at approximately $102 billion).
- Press Note 3 (2020): mandatory government approval for FDI from 7 land-border-sharing countries — China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan.
- 2026 Press Note 3 amendment: automatic route permitted for land-border-country FDI below a 10% non-controlling ownership/control threshold.
- Anti-dumping de minimis thresholds: below 3% import share (single country) or 7% (cumulative, multiple countries) — no investigation initiated.
- DGTR established: 2018, under the Ministry of Commerce and Industry.
- Legal basis for anti-dumping in India: Sections 9A-9C, Customs Tariff Act, 1975.