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India has imposed restrictions on Chinese investments, a move driven not only by economic considerations but also by national security concerns and geopolitical realities.

Any potential shift in this stance will not be immediate—and for good reason. The 2020 Galwan Valley clashes intensified scrutiny of Chinese investments in   India. Since then, the country has systematically tightened its Foreign Direct Investment (FDI) norms, making prior government approval mandatory for investments from nations sharing a land border with India.

This policy primarily targets China, which had rapidly expanded its presence in Indian start-ups, technology firms, and critical infrastructure. Undoubtedly, restrictions on Chinese firms have impacted core sectors, particularly those dependent on capital inflows.

In response, India has actively sought alternatives. Domestic investors, venture capital firms, and global players from the U.S., Japan, and Europe have stepped in to fill the gap. Through this, India has sent a clear message: it is willing to forgo short-term economic gains to safeguard long-term strategic interests.

However, the issue extends beyond investments. Trade imbalance remains a pressing concern.

India’s trade deficit with China stands between $93 billion and $95 billion—one of the largest in the world.  Addressing this imbalance requires more than restricting increase in tariff on imports, reducing tariff on exports, increase tariff on exports of iron ore, raw material, boosting local production of imported items.

While dialogues on trade and investment have been initiated, they do not indicate a shift in India’s policy on Chinese investments. A meaningful policy change would require a significant shift in China’s approach toward India, particularly on security issues.

Until China demonstrates a willingness to address core concerns—such as border tensions and unfair trade practices—India’s strategic considerations will continue to take precedence over economic incentives.