New Delhi, August 30: India has successfully balanced its economic partnerships with both the United States and China during 2026. The country resolved a tariff dispute with Washington through negotiations and eased restrictions on Chinese investments for the first time since the border conflicts of 2020. This information was revealed in a recent article.
According to the article, on February 2, Prime Minister Narendra Modi and US President Donald Trump agreed to reduce reciprocal tariffs on Indian goods from 25% to 18% during a phone conversation. Additionally, the punitive 25% tariff on Russian oil purchases was completely removed.
Both governments have publicly reiterated that the US Supreme Court’s decision on tariffs will not affect this agreement with India. Following this, the US imposed a separate 10% duty under Section 301. However, approximately 45% of India’s exports are exempt from this duty. Meanwhile, safeguard tariffs on quartz surface products have increased to 55%.
In an article by Alok Kumar Kanojia in Geopolitical Monitor, it is noted that the overall tariff regime is now less volatile and more predictable compared to a year ago.
On March 10, the central cabinet amended Press Note 3, a regulation from 2020 that required all investments from countries sharing land borders with India to undergo mandatory government approval. However, this amendment does not fully open the door for direct investment from China, as prior government approval is still required.
Under the new rules, an automatic route has been established for companies with less than 10% beneficial ownership from China that is non-controlling. Additionally, a 60-day approval timeline has been set for specific manufacturing sectors, including capital goods, electronic components, and solar energy inputs like polysilicon and ingot wafers.
By the end of August, the government reported that approximately ₹4,896 crore in foreign direct investment (FDI) had come in under the relaxed rules for 29 projects, primarily in IT, pharmaceuticals, data centers, and manufacturing.
This approach does not fully open the door to China but provides a limited pathway. Notably, China eased export restrictions on rare earth fertilizers and tunnel boring machines last August.
During 2026, border talks between India and China have also accelerated, exemplified by National Security Advisor Ajit Doval’s visit to Beijing this week. This marked the first dialogue between special representatives on the border dispute in five years, occurring ahead of the upcoming BRICS summit in New Delhi next month.
The article suggests that the trade agreement with the US and the cautious opening towards China may appear as two separate diplomatic narratives. However, when viewed together, they indicate India’s attempt to diversify its dependence on various sources for capital and demand. This is particularly significant as forecasts for India’s economic growth are being revised downward.
The United Nations’ mid-year economic outlook estimates India’s growth at 6.6% for 2026, down from last year’s projected 7.4%. The report cites geopolitical tensions and policy uncertainties as challenges for the global environment.
Conversely, S&P had a more optimistic outlook earlier this year, projecting India’s economic growth at 7.1% for the fiscal year 2027, based on stable exports and improved investment cycles.
Both estimates hinge on India’s ability to continue attracting foreign capital, which helps stabilize its external accounts.
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