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India Plans to Ease Chinese FDI Rules for Renewables and Manufacturing

India is considering easing restrictions on Chinese investments in select sectors such as renewable energy, manufacturing, and auto components, which have been under strict scrutiny since 2020 under Press Note 3 (PN-3). At present, any investment from neighboring countries, especially China, requires government approval due to security concerns. However, with growing tariff pressures from the US on China and India, both nations are looking to strengthen economic ties.

The proposed changes would allow 20–25% Chinese investments through the automatic route in non-sensitive areas, meaning firms would not need prior approval from New Delhi. Sensitive sectors such as defence, telecom, exploration, and strategic installations will remain restricted. Officials say that easing rules could boost job creation in India, as many Chinese firms already have large-scale manufacturing units and supply goods to Indian markets.

The announcement is expected around Prime Minister Narendra Modi’s visit to China for the Shanghai Cooperation Organization (SCO) summit. While the move could encourage foreign capital inflows and support India’s renewables and auto industries, it will still involve strict scrutiny to ensure that security and strategic interests are not compromised.