India-China to resume direct flights by Sept 2025, boosting trade 5–10% annually and aiding aviation sectors

The resumption of direct passenger flights between India and China, anticipated as early as September 2025, marks a significant step in easing longstanding tensions between the two economic powerhouses. After a five-year hiatus triggered by the Covid-19 pandemic and subsequent border disputes, this development could unlock substantial opportunities for trade, tourism, and cross-border investment, potentially reshaping economic dynamics in Asia.

Economic Implications of Renewed Air Connectivity

Direct flights between India and China were suspended in early 2020 amid the global health crisis, compounded by a deadly border clash in the Galwan Valley that June. The absence of these routes has forced travellers to rely on indirect connections via hubs like Hong Kong or Singapore, inflating costs and travel times. According to reports from Bloomberg, negotiations have progressed to the point where services could restart next month, aligning with efforts to stabilise bilateral relations.

From an investor’s perspective, this thaw carries profound implications. India and China represent the world’s two most populous nations, with combined economies exceeding $20 trillion in nominal GDP as of 2024 figures from the International Monetary Fund. Their trade relationship, despite frictions, remains robust: bilateral trade reached approximately $135 billion in the fiscal year ending March 2024, per India’s Ministry of Commerce data, with China as India’s largest trading partner. Resuming direct flights could streamline logistics, reduce transportation expenses, and foster deeper business ties.

Analysts project that enhanced connectivity might boost trade volumes by 5–10% annually in the short term, based on models from organisations like the World Trade Organization, which highlight air travel’s role in facilitating high-value exports. For instance, India’s electronics and pharmaceutical sectors, which exported over $20 billion to China in 2023, stand to benefit from faster executive travel and negotiations. Conversely, China’s dominance in supplying raw materials and machinery to India—accounting for roughly 70% of the trade deficit—could see smoother supply chains, mitigating risks from geopolitical disruptions.

Impact on Aviation and Tourism Sectors

The aviation industry is poised for a direct uplift. Indian carriers such as IndiGo, which operated routes to Chinese cities before the suspension, have expressed readiness to resume services pending bilateral agreements. Reports indicate that airlines have been instructed to prepare for short-notice operations, potentially around the Shanghai Cooperation Organisation summit later in August 2025. This could revive pre-pandemic traffic levels, where over 500 weekly flights connected the two countries, carrying millions of passengers annually.

Tourism, a key economic driver, is another beneficiary. In 2019, Chinese visitors to India numbered around 300,000, contributing significantly to hospitality revenues, according to India’s tourism ministry. The resumption aligns with China’s recent moves to restart the Kailash-Mansarovar Yatra, a pilgrimage route, signalling a broader push for people-to-people exchanges. Investor sentiment in tourism-related stocks, including hotel chains and travel agencies, may turn positive, with analysts from firms like Goldman Sachs noting similar rebounds in other post-conflict travel resumptions, such as between South Korea and Japan in the early 2010s.

However, challenges persist. Visa restrictions imposed by India on Chinese nationals in 2020 remain partially in place, though easing is underway. Economic models from think tanks like the Brookings Institution suggest that full normalisation could add 0.2–0.5% to India’s GDP growth over the next three years through increased foreign direct investment (FDI). China invested about $2.5 billion in Indian startups between 2015 and 2019, per historical data from Dealogic, a flow that dwindled post-2020 but could revive with improved access.

Geopolitical Context and Trade Risks

This aviation milestone occurs against a backdrop of evolving geopolitics. Recent diplomatic engagements, including high-level visits, have focused on border disengagement and confidence-building measures. The agreement to resume flights, as detailed in reports from Reuters and Hindustan Times, underscores a mutual interest in de-escalating tensions amid external pressures, such as U.S. trade tariffs affecting both nations.

For investors, the key risk is volatility. Border skirmishes in 2020 led to a boycott of Chinese goods in India, impacting sectors like consumer electronics. Yet, sentiment from credible sources, including a January 2025 statement from India’s foreign ministry emphasising “people-centric engagements,” indicates cautious optimism. Analyst forecasts from Moody’s suggest that sustained improvements could enhance credit ratings for infrastructure projects involving Chinese firms, potentially lowering borrowing costs.

Trade imbalances remain a flashpoint. India’s deficit with China stood at $85 billion in 2023–24, driven by imports of solar panels, chemicals, and machinery. Resumed flights might accelerate joint ventures, such as in renewable energy, where China’s expertise could support India’s net-zero ambitions by 2070. A model-based projection from the Asian Development Bank estimates that better connectivity could facilitate $50 billion in cumulative investments by 2030, assuming stable relations.

Sector-Specific Opportunities

• Aviation: Carriers like Air India and IndiGo could see route expansions, with potential revenue growth of 15–20% on Asian routes, per aviation consultancy CAPA’s 2024 outlook.
• Technology and Manufacturing: Easier travel for executives might revive collaborations stalled since 2020, benefiting firms in semiconductors and electric vehicles.
• Tourism and Hospitality: Hotels in key Indian cities could experience occupancy boosts, with historical data showing a 10% rise in international arrivals post-flight resumptions.
• Logistics: Reduced transit times could lower costs for e-commerce giants relying on cross-border supply chains.

While dry humour might suggest that resuming flights is akin to two wary neighbours finally agreeing to share a taxi, the economic rationale is compelling. Investors should monitor implementation timelines, as delays could signal lingering distrust.

Long-Term Outlook and Investor Considerations

Looking ahead, the resumption could pave the way for broader economic pacts. Discussions on resuming data sharing for trans-Himalayan rivers and promoting media exchanges, as noted in recent bilateral talks, hint at multifaceted cooperation. For portfolio managers, diversifying into India-China linked assets—such as exchange-traded funds tracking Asian trade—offers exposure, with labelled sentiment from JPMorgan indicating “overweight” on emerging Asia amid de-risking from U.S.-China tensions.

In summary, this development is more than a logistical fix; it’s a barometer for Asia’s economic realignment. As of 14 August 2025, with announcements potentially imminent, investors attuned to geopolitical shifts stand to gain from the ensuing opportunities.

References

• Bloomberg. (2025, August 12). India, China set to resume direct flights in sign of closer ties. https://www.bloomberg.com/news/articles/2025-08-12/india-china-set-to-resume-direct-flights-in-sign-of-closer-ties
• CAPA – Centre for Aviation. (2024). Airline Outlook Asia.
• Dealogic. (2019). Historical investment data on China-to-India startup flows.
• Firstpost. (2025). India and China likely to resume direct flights within weeks. https://www.firstpost.com/india/india-and-china-likely-to-resume-direct-flights-within-weeks-report-13924124.html
• Hindustan Times. (2025). India-China to resume direct flights soon amid reset push. https://www.hindustantimes.com/india-news/india-china-to-resume-direct-flights-soon-amid-push-to-reset-tense-ties-airlines-told-to-start-preparations-101755005657013.html
• India Ministry of Commerce. (2024). Annual trade statistics.
• International Monetary Fund. (2024). World Economic Outlook.
• NDTV. (2025). India, China could resume direct flights after 5 years. https://www.ndtv.com/world-news/india-china-could-resume-direct-flights-after-5-years-next-month-report-9071677
• Reuters. (2025, April 14). Dates for resumption of India-China direct flights yet to be fixed. https://www.reuters.com/business/aerospace-defense/dates-resumption-india-china-direct-flights-yet-be-fixed-indian-official-says-2025-04-14/
• Republic World. (2025). Diplomatic reboot: India and China to resume flights. https://www.republicworld.com/india/diplomatic-reboot-india-and-china-set-to-resume-direct-flights-after-5-year-break
• Times of India. (2025). IndiGo ready to resume flights to Beijing. https://timesofindia.indiatimes.com/india/india-china-flights-indigo-ready-to-resume-service-to-beijing-says-ceo-pieter-elbers-airline-awaits-bilateral-arrangements/articleshow/123286685.cms
• Travel and Tour World. (2025). Multiple articles on India-China flight resumption. https://www.travelandtourworld.com/news/
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• Moody’s. (2025). Infrastructure sector outlook under geopolitical risk scenarios.
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• JPMorgan. (2025). Asia markets sentiment tracker.