New Delhi reopened the door to the Chinese capital in March. The four months since provide the immediate test, but read alongside full-year FY2025-26 data and longer-term structural indicators, the evidence suggests that the decisive constraints on India’s China strategy lie not in the Centre’s circulars but in the administrative capacity of its state governments.
On 10 March 2026, the Union Cabinet amended Press Note 3, the 2020 rule that had subjected all foreign direct investment (FDI) from land-bordering countries, in practice China, to prior government approval. Codified as Press Note 2 of 2026, the revised framework permits non-controlling beneficial ownership of up to 10% through the automatic route and offers a 60-day expedited clearance for priority manufacturing such as electronic components and capital goods. Control transactions, Hong Kong-incorporated entities, and sensitive sectors remain fenced off. It is a calibrated reopening, consistent with the managed interdependence that now defines India’s China posture.
Four months on, the early signals point in the same direction as the full-year FY2025-26 data and the longer-run structural record: the binding constraint was never the circular. India’s capacity to reduce strategic dependence on China has become less a question of what New Delhi permits than of what its states can deliver. That shifts de-risking from the realm of foreign economic policy into the far less glamorous territory of land records, power tariffs, and industrial training institutes.
