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 an 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 regarding tariffs will not affect this agreement with India. Following this, the US separately imposed a 10% duty under Section 301, although approximately 45% of India’s exports are exempt from this duty. Meanwhile, safeguard tariffs on quartz surface products have increased to 55%.
As per Alok Kumar Kanojia’s article in Geopolitical Monitor, the overall tariff regime is now less and more predictable compared to a year ago.
On March 10, the central cabinet amended Press Note 3, a rule from 2020 that required all investments from countries sharing land borders with India to undergo mandatory government approval. However, this amendment did not completely open the door for direct investment from China, as prior government approval is still necessary.
Under the new rules, an automatic route has been established for companies with less than 10% beneficial ownership from China that are non-controlling. Additionally, a 60-day approval timeline has been set for select manufacturing sectors, including capital goods, electronic components, and solar energy-related 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 easier regulations for 29 projects, spanning sectors such as 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 magnets 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 visit marked the first talks 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 while the trade agreement with the US and the cautious opening towards China may appear as two separate diplomatic narratives, together they illustrate India’s attempt to diversify its dependence for capital and demand across different sources. This is happening at a time when 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 identifies geopolitical tensions and policy uncertainty as challenges for the global environment.
Conversely, S&P had projected a more optimistic outlook earlier this year, estimating India’s economic growth at 7.1% for the fiscal year 2027, based on stable exports and improvements in the investment cycle.
Both projections depend on India’s ability to continue attracting foreign capital, which helps stabilize its external accounts.
Deependra Singh Chundawat is a Senior Sub-Editor at Udaipur Kiran, specializing in a wide range of technology topics including mobile phones, applications, gaming, PCs, and wearables. Along with covering the latest tech news, he also creates engaging web stories. Passionate about emerging technologies, he stays up to date with the newest trends and enjoys reading and writing about the latest mobile launches and digital innovations.