India-China Border Tensions: Navigating Risks and Opportunities in Regional Infrastructure and Energy Investments – AInvest

Impact of India-China Border Standoff on Regional Infrastructure and Energy Projects: A Sustainable Development Perspective

The ongoing unresolved border standoff between India and China along the Line of Actual Control (LAC) has created a volatile geopolitical environment affecting regional infrastructure and energy initiatives. Persistent cross-border tensions necessitate a thorough assessment of how strategic competition, supply chain vulnerabilities, and diplomatic challenges reshape sectors such as railways, renewable energy, and cross-border logistics. This report analyzes associated risks and opportunities with a focus on advancing the Sustainable Development Goals (SDGs), providing insights for stakeholders navigating this complex landscape.

Railways: Delays, Dependency, and the Push for Self-Reliance

India’s dependence on Chinese-manufactured equipment for critical infrastructure projects exposes significant vulnerabilities. For example, the Mumbai-Ahmedabad high-speed rail corridor is experiencing delays due to three tunnel-boring machines (TBMs) stranded at a Chinese port since late 2023, obstructing the construction of a 7-km undersea tunnel. This situation exemplifies how geopolitical tensions disrupt infrastructure development, impacting SDG 9 (Industry, Innovation, and Infrastructure) and SDG 11 (Sustainable Cities and Communities).

Sector Risks

• Supply Chain Disruptions: Over 40% of India’s railway infrastructure imports, including tracks, signaling systems, and tunneling equipment, originate from China. Delays in TBM deliveries threaten to postpone the Mumbai-Ahmedabad project beyond its 2028 completion target, affecting sustainable infrastructure goals.
• Geopolitical Sabotage: Cross-border railway projects in Nepal, such as the Raxaul-Kathmandu (India) and Kerung-Kathmandu (China) lines, face delays due to gauge incompatibility and mistrust. India’s insistence on broad-gauge standards versus China’s standard-gauge risks creating a fragmented network, undermining regional connectivity (SDG 9, SDG 17 – Partnerships for the Goals).

Opportunities

• Domestic Manufacturing Surge: India’s Aatmanirbhar Bharat initiative promotes self-reliance by incentivizing local production. Companies such as Herrenknecht India and JSW Infrastructure stand to benefit, supporting SDG 8 (Decent Work and Economic Growth) and SDG 12 (Responsible Consumption and Production).
• Alternative Partnerships: With stalled cross-border railways, India is accelerating rail connectivity to Southeast Asia via Bangladesh. The Bangladesh-China-India-Myanmar (BCIM) corridor offers a geopolitically safer logistics route, enhancing regional trade and sustainable infrastructure development (SDG 9, SDG 17).

Renewable Energy: Solar and EV Supply Chains in the Crosshairs

India’s renewable energy ambitions face challenges due to heavy reliance on Chinese imports. Over 70% of solar panels and 93% of rare earth magnets for electric vehicles (EVs) are sourced from China. Beijing’s 2023 export controls on gallium and germanium have disrupted Indian solar manufacturing, posing risks to SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action).

Sector Risks

• Strategic Vulnerabilities: A sudden cutoff of Chinese solar equipment could delay India’s goal of achieving 500 GW renewable capacity by 2030. EV manufacturers like Tata Motors and Mahindra Electric face potential production halts due to shortages of Chinese-sourced magnets.
• Trade Imbalance: India’s $85 billion annual trade deficit with China includes large imports of solar modules and EV batteries, exposing investors to currency risks and regulatory uncertainties.

Opportunities

• Diversification Initiatives: India’s efforts to develop lithium mining in Jharkhand and rare earth partnerships with Australia create opportunities for companies like Lithium Australia (ASX:LIT), supporting sustainable industrialization (SDG 9) and responsible resource management (SDG 12).
• U.S.-Backed Technological Collaboration: Ongoing U.S.-India trade negotiations aim to exempt Indian solar and EV imports from tariffs, benefiting firms such as Welspun Energy. The Hydrogen Energy Ministerial, co-hosted by India, highlights emerging opportunities in green hydrogen, advancing clean energy transitions (SDG 7, SDG 13).

Cross-Border Logistics: Navigating the Nepal Impasse

Nepal’s geopolitical position between India and China has stalled critical cross-border logistics projects. The Kerung-Kathmandu railway, part of China’s Belt and Road Initiative, faces technical challenges including 98% tunneling through the Himalayas. Simultaneously, India’s Raxaul-Kathmandu railway is delayed by bureaucratic hurdles, with no significant progress since 2022. These challenges affect SDG 9 and SDG 17 by impeding regional connectivity and cooperation.

Sector Risks

• Geopolitical Deadlock: Nepal’s indecision between Indian and Chinese railway standards has paralyzed rail infrastructure development, posing risks for logistics investors such as DP World and AAR Logistics due to overexposure to Sino-Indian rivalry.
• Environmental Concerns: Projects like the Kerung-Kathmandu railway threaten Nepal’s Langtang National Park, risking environmental degradation and public opposition, impacting SDG 15 (Life on Land).

Opportunities

• Road Infrastructure Development: With railway projects stalled, Nepal’s road initiatives, including the Kathmandu-Pokhara expressway, are advancing. Construction firms like L&T Infrastructure and GMR Group could benefit from shorter lead times and reduced geopolitical risks, contributing to sustainable infrastructure (SDG 9).
• Third-Party Mediation: Neutral international investors such as the Asian Development Bank and World Bank may fund Nepal’s energy and logistics projects, facilitating cooperation and reducing geopolitical tensions (SDG 17).

Investment Strategy: Focus on De-Risked Sectors

1. Prioritize Domestic Manufacturing: Support companies like JSW (rail infrastructure) and Adani Green Energy (solar) aligned with India’s self-reliance goals, promoting sustainable economic growth (SDG 8) and industry innovation (SDG 9).
2. Invest in Regional Trade Corridors: Focus on Southeast Asia-linked logistics such as the BCIM corridor, which offer lower geopolitical risk and enhanced regional integration (SDG 9, SDG 17).
3. Monitor U.S.-India Technological Agreements: The U.S. Indo-Pacific Economic Framework (IPEF) may enable tariff-free EV exports for companies like Tata Motors, reducing dependence on Chinese supply chains and fostering clean energy adoption (SDG 7, SDG 13).

Conclusion

The India-China border tensions have significantly altered the investment landscape for infrastructure and energy sectors. While railways and cross-border projects remain vulnerable to geopolitical risks, sectors emphasizing domestic manufacturing and U.S.-backed technological partnerships present resilient opportunities. Aligning investment strategies with India’s Aatmanirbhar Bharat vision supports sustainable development by fostering self-reliance, innovation, and regional cooperation. Stakeholders who navigate these complexities with a focus on the Sustainable Development Goals will be best positioned to succeed in a post-China supply chain environment.

Analysis by Jeanna Smialek, geopolitical and economic analyst specializing in Asian markets, as of June 2025.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

• SDG 7: Affordable and Clean Energy – The article discusses India’s renewable energy ambitions, solar panel imports, EV supply chains, and green hydrogen initiatives.
• SDG 9: Industry, Innovation, and Infrastructure – The focus on railways, infrastructure projects, domestic manufacturing, and supply chain resilience relates directly to this goal.
• SDG 8: Decent Work and Economic Growth – Investment strategies, trade corridors, and industrial growth through self-reliance initiatives support economic growth and employment.
• SDG 16: Peace, Justice, and Strong Institutions – The geopolitical tensions, border disputes, and cross-border logistics challenges reflect issues of peace and institutional cooperation.
• SDG 17: Partnerships for the Goals – The article highlights international cooperation such as U.S.-India trade talks, Asian Development Bank and World Bank mediation, and regional trade corridors.
• SDG 13: Climate Action – The push for renewable energy and green hydrogen aligns with climate mitigation efforts.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

• SDG 7 (Affordable and Clean Energy)
  • Target 7.2: Increase substantially the share of renewable energy in the global energy mix by 2030 (India’s 500 GW renewable capacity target by 2030).
  • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology (U.S.-India trade talks and hydrogen energy ministerial).
• SDG 9 (Industry, Innovation, and Infrastructure)
  • Target 9.1: Develop quality, reliable, sustainable infrastructure, including regional and transborder infrastructure (railway projects, BCIM corridor, cross-border logistics).
  • Target 9.2: Promote inclusive and sustainable industrialization and raise industry’s share of employment and GDP (Aatmanirbhar Bharat initiative and domestic manufacturing surge).
  • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable (diversification of supply chains and reducing reliance on Chinese imports).
• SDG 8 (Decent Work and Economic Growth)
  • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation (investment in domestic manufacturing and regional trade corridors).
• SDG 16 (Peace, Justice, and Strong Institutions)
  • Target 16.7: Ensure responsive, inclusive, participatory and representative decision-making at all levels (cross-border negotiations and third-party mediation in Nepal).
  • Target 16.10: Ensure public access to information and protect fundamental freedoms (implied through transparency challenges in bureaucratic delays and geopolitical tensions).
• SDG 17 (Partnerships for the Goals)
  • Target 17.6: Enhance North-South, South-South and triangular regional and international cooperation on and access to science, technology and innovation (U.S.-India tech deals and international trade frameworks).
  • Target 17.9: Enhance international support for implementing effective and targeted capacity-building in developing countries (Asian Development Bank and World Bank involvement).
• SDG 13 (Climate Action)
  • Target 13.2: Integrate climate change measures into national policies, strategies and planning (promotion of renewable energy and green hydrogen).

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

• SDG 7 Indicators
  • Indicator 7.2.1: Renewable energy share in the total final energy consumption (India’s progress towards 500 GW renewable capacity by 2030).
  • Indicator 7.a.1: International financial flows to clean energy research and development (U.S.-India trade talks and hydrogen energy ministerial cooperation).
• SDG 9 Indicators
  • Indicator 9.1.1: Proportion of the rural population who live within 2 km of an all-season road (related to Nepal’s road infrastructure projects).
  • Indicator 9.2.2: Manufacturing value added as a proportion of GDP and per capita (growth of domestic manufacturing under Aatmanirbhar Bharat).
  • Indicator 9.4.1: CO2 emission per unit of value added (efficiency and sustainability of infrastructure and industry upgrades).
• SDG 8 Indicators
  • Indicator 8.2.1: Annual growth rate of real GDP per employed person (economic productivity from diversification and innovation).
• SDG 16 Indicators
  • Indicator 16.7.2: Proportion of population who believe decision-making is inclusive and responsive (implied in cross-border cooperation and mediation effectiveness).
  • Indicator 16.10.2: Number of verified cases of killing, kidnapping, enforced disappearance, arbitrary detention and torture of journalists, associated media personnel, trade unionists and human rights advocates (implied need for transparency and protection in geopolitical contexts).
• SDG 17 Indicators
  • Indicator 17.6.2: Fixed Internet broadband subscriptions per 100 inhabitants, by speed (proxy for technology access and cooperation).
  • Indicator 17.9.1: Dollar value of financial and technical assistance (including through North-South, South-South and triangular cooperation) committed to developing countries (ADB and World Bank funding).
• SDG 13 Indicators
  • Indicator 13.2.1: Number of countries that have communicated the establishment or operationalization of an integrated policy/strategy/plan which increases their ability to adapt to the adverse impacts of climate change (India’s renewable energy and green hydrogen policies).

4. Table of SDGs, Targets, and Indicators

Source: ainvest.com