The parks will be developed through joint ventures involving state governments and a state-run company, Vaishnaw told reporters after the cabinet meeting.

Industry Secretary Amardeep Singh Bhatia said the government expects to develop about 33,000 acres of land for manufacturing over a period of six years.

The planned industrial parks will range in size from 100 acres to 1,000 acres, equivalent to about 40.5 hectares to 404.7 hectares, he said. The government will provide financial support of up to 10 million rupees per acre for core and social infrastructure within the parks.

Officials said the initiative is aimed at creating integrated manufacturing zones with necessary facilities to support industrial activity.

The programme reflects India’s ongoing efforts to expand its manufacturing base through infrastructure development and coordination with state governments.

The use of joint ventures is expected to facilitate land acquisition and project implementation, while financial assistance is intended to reduce upfront costs for infrastructure development.

Separately, the cabinet approved 117 billion rupees for minimum support prices for cotton purchases, according to government officials.

The allocation is intended to support procurement operations under existing price support mechanisms.

Sitharaman said the proposed fund would help the government address disruptions such as supply chain interruptions and sudden economic stresses while maintaining stability in public finances.

The stabilisation fund is intended to provide the government with additional fiscal headroom during periods of volatility in global markets or trade flows, Sitharaman told lawmakers.The proposal comes as the government seeks parliamentary approval for gross additional spending of 2.81 trillion rupees.

According to Sitharaman, part of the additional expenditure will be offset by savings and higher receipts from various ministries and departments.She said the proposed spending adjustments would not increase the government’s overall expenditure beyond the levels outlined in the federal budget.

Sitharaman also proposed additional fertiliser subsidies amounting to about 192.30 billion rupees to cover higher spending under the nutrient-based subsidy policy and payments for urea subsidies.

India’s fertiliser subsidy bill has come under pressure following disruptions to supply routes linked to tensions involving Iran, particularly around the Strait of Hormuz, a key corridor for global fertiliser shipments.

The disruption has pushed up prices for crop nutrients such as urea and ammonia, increasing import costs for major buyers including India.

Sitharaman said the government would ensure there was no shortfall in funds for fertiliser subsidies for farmers.

The decision represents one of the most significant adjustments to India’s investment screening regime since New Delhi tightened scrutiny of foreign capital from neighbouring countries following the confrontation along the disputed Himalayan frontier. The earlier restrictions had sharply slowed Chinese investment into India and complicated business ties between the two Asian powers.

Government officials have said the easing will apply to selected sectors, though authorities have not detailed the full scope of industries affected. The move forms part of a broader effort to stabilise bilateral relations that have gradually improved since diplomatic and military engagements helped ease tensions along the border.

India introduced stringent investment screening rules in April 2020, requiring government approval for all foreign direct investment from countries sharing a land border with India. The policy applied most prominently to Chinese firms and was framed by New Delhi as a safeguard against opportunistic takeovers of Indian companies during the economic disruptions caused by the COVID-19 pandemic.

The measure followed a deterioration in relations after a deadly clash between Indian and Chinese troops along their disputed frontier in June 2020. The confrontation led to the most serious military standoff between the two nuclear-armed neighbours in decades and triggered a broad reassessment of economic engagement.

Shortly after the clash, India banned 59 mobile applications linked to Chinese companies, including TikTok, WeChat and UC Browser, citing national security concerns. The ban marked a major escalation in India’s technology restrictions on Chinese firms and was followed by additional curbs affecting telecommunications equipment, infrastructure projects and digital services.

The heightened scrutiny of Chinese investment had a tangible impact on cross-border business activity. Several proposed projects by Chinese companies faced delays or failed to receive regulatory clearance under the tighter rules.

In July 2022, Chinese automaker Great Wall Motor abandoned plans to invest $1 billion in India after it was unable to obtain government approvals required under the post-2020 investment screening framework.

A year later, India rejected a separate $1 billion investment proposal from Chinese electric vehicle manufacturer BYD, again citing security concerns linked to foreign investment from neighbouring countries.

The stalled investments underscored the broader chill in economic ties that followed the border confrontation. While trade between the two countries continued at significant levels, new investment activity from Chinese firms slowed sharply amid regulatory barriers and heightened political sensitivity.

Industry groups and manufacturers had raised concerns that the restrictions were complicating supply chains and delaying industrial projects that relied on Chinese capital, components or technical expertise.

Relations between India and China began to stabilise after the two sides reached an agreement in October 2024 on patrolling arrangements along the disputed frontier, effectively ending a four-year military standoff.

Diplomatic engagement expanded gradually after that agreement, paving the way for a series of economic and travel-related policy adjustments.In July 2025, the government think tank NITI Aayog proposed allowing Chinese companies to acquire up to a 24% stake in Indian firms without requiring security clearance. The proposal was aimed at reducing approval delays created by the post-2020 screening system while maintaining oversight of sensitive sectors.

The diplomatic thaw became more visible in August 2025 when Prime Minister Narendra Modi travelled to China for the first time in more than seven years. The visit signalled renewed engagement between the two governments at a time when geopolitical tensions between China and the United States were rising.

Further steps toward normalising economic ties followed later in the year. In October 2025, the two countries agreed to resume direct commercial flights after a five-year suspension that had disrupted travel and business links.

By December 2025, India began issuing more business visas to Chinese professionals, a move intended to address shortages of technical staff at factories and industrial facilities that had reduced output and delayed projects across several sectors.

Economic considerations have increasingly influenced India’s approach to managing its relationship with China. Indian companies and state-run enterprises have faced supply constraints in areas where Chinese equipment and technical support remain widely used.

In February 2026, India began easing restrictions on the purchase of certain Chinese industrial equipment, allowing state-owned power and coal companies to import machinery in limited quantities. Officials said the policy change was intended to address shortages that had slowed energy and infrastructure projects.

The latest move to relax investment restrictions is seen as part of this broader recalibration. While the government has not announced a full reversal of the screening framework introduced in 2020, officials have indicated that selected sectors could receive greater flexibility for foreign capital.Trade between the two countries has remained robust despite diplomatic tensions, with China continuing to be one of India’s largest trading partners.

However, investment flows have lagged behind trade volumes since the regulatory tightening.Analysts say the evolving policy stance reflects India’s attempt to balance economic needs with security concerns related to strategic industries and infrastructure.

Government officials have not provided detailed guidance on the sectors covered by the eased investment rules or whether additional regulatory safeguards will accompany the policy shift.

The conflict, which has spread tensions across much of the Middle East, has pushed global oil prices up by about 15%, disrupted gas flows from the region and triggered sharp reactions across Indian financial markets. The rupee fell to a record low, while government bond yields rose as investors grew concerned about the country’s current account deficit and the potential inflationary impact of higher energy costs.Despite the market turbulence, central bank officials assessing the situation believe the most immediate risk lies in slower economic growth rather than a sustained surge in inflation, according to the sources familiar with policy deliberations.

Growth risks outweigh inflation pressuresIndia relies heavily on imported crude oil, making it vulnerable to supply disruptions and price spikes when geopolitical tensions escalate in energy-producing regions. The recent conflict has raised concerns that prolonged instability could raise import costs and widen the country’s trade deficit.However, policymakers appear to believe that weakening economic activity could pose a more pressing challenge in the near term. Slower industrial output and potential disruptions to energy supplies could affect sectors reliant on stable fuel and gas availability.The current policy thinking contrasts with the reaction in financial markets, where traders have started pricing in the possibility of higher interest rates. Interest rates have risen across global and emerging markets since the conflict began, reflecting fears that higher energy costs could feed into broader inflation.In India’s interest-rate swap market, traders have increased bets that borrowing costs may rise at least once over the next 12 months.“I don’t feel the market has sufficiently priced the risk from oil prices rising significantly,” said Ritesh Bhusari, joint general manager for treasury at South Indian Bank. He said swap rates could move higher if Brent crude remains above $80 per barrel over the coming weeks.Policy pause after earlier rate cutsThe Reserve Bank of India’s Monetary Policy Committee paused its easing cycle in February after cutting the policy repo rate by 125 basis points during 2025 to support economic activity.The panel is scheduled to hold its next policy review in about a month, when policymakers are expected to reassess the economic outlook amid continuing geopolitical tensions.The sources declined to be identified because they are not authorised to speak publicly about internal policy discussions. An email sent to the Reserve Bank of India seeking comment was not immediately answered.Energy supply disruptions raise concernsThe most immediate economic risk for India may stem from disruptions to natural gas supplies from the Middle East. Earlier this week, Indian companies reduced gas supplies to some industries in anticipation of tighter flows from the region.Such restrictions could affect output in sectors including fertilisers and power generation, which depend heavily on stable gas supplies.One of the sources said that if supply disruptions persist for more than four weeks, they could begin to affect economic growth for at least a quarter.The Middle East conflict has also complicated global monetary policy expectations. Traders have pushed back bets on interest rate cuts by the Federal Reserve while increasing expectations of a potential rate hike by the European Central Bank.Analysts at Goldman Sachs said a sustained rise in oil prices above $100 per barrel or a faster transmission of energy costs into consumer prices could push global central banks toward a more hawkish stance.