China-India detente gains steam as NITI Aayog proposes easing investment curbs

Indian think tank NITI Aayog has recommended that Chinese companies be allowed to acquire up to a 24% stake in Indian firms without mandatory screening, in what would mark a major shift from the investment restrictions imposed after the 2020 border clash. The proposal, backed by the trade ministry’s industries department, is being studied by various ministries and the prime minister's office, according to the South China Morning Post. The rethink is driven by a steep decline in foreign direct investment, which fell to just $353 million last year from $43.9 billion in the year ending March 2021, with Chinese FDI particularly underwhelming even before the Galwan clash.

Broader signs of a quiet thaw include the resumption of direct flights after five years, reopening of the Kailash Mansarovar pilgrimage route, and recent corps commander-level talks. PM Narendra Modi and President Xi Jinping exchanged pleasantries at the SCO summit. Chinese brands such as Xiaomi and Vivo dominate India’s smartphone market, and Chinese EV maker BYD has targeted up to 40% of India's EV market. Bilateral trade reached about $127.7 billion last year, with Chinese exports making up over $113 billion of that. Indian conglomerates such as Adani and JSW are reportedly engaging Chinese firms on technology partnerships.

Both sides face strong economic incentives for deeper ties: India needs Chinese inputs for its manufacturing ambitions, while China sees India's vast consumer market as an opportunity amid a slowing domestic economy. However, strategic distrust persists, and the SCMP notes that without more concrete steps, the current calm could remain a tactical pause rather than a strategic moderation.