Nathu La and Other Passes: India-China Border Trade Resumes

Background

Border trade through Nathu La resumed on August 1, 2026, opening up a six-year suspension that COVID-19 had forced. The route connects India's Sikkim with Tibet, and its reopening signals a gradual restoration of economic and people-to-people exchanges after years of strained ties. The pass had first reopened during July 2006, four decades after the 1962 war shut it down. And this opening itself was seen as a major diplomatic milestone. Before 1962, it carried roughly 80 percent of all India-China border trade, which gives us an idea as to how important this corridor once was. 

Under the present deal, India and China have agreed to reopen three designated passes: Lipulekh in Uttarakhand, Shipki La in Himachal Pradesh, and Nathu La in Sikkim. In addition, direct flights have been resumed following the 24th round of the Special Representatives' dialogue between NSA Ajit Doval and Chinese Foreign Minister Wang Yi during his two-day visit to India.

Trade operations

Around 36 export and 20 import categories of goods are permitted for cross-border trade through Nathu la, Shipki la and Lipulekh pass. The goods include handicrafts, handloom products, religious items, and ready-made garments.The Sikkim government has formally requested the Directorate General of Foreign Trade to expand the list of tradable goods. This year, 38 registered traders have been issued permits to participate in the cross-border trade in these passes.

The trade only runs from May to November, because of the weather conditions, and it follows Standard Operating Procedures (SOP) . The actual buying and selling happens at two exchange points as per SOP, Sherathang on India's side and Renqinggang on the Tibet side. Even within this trade structure, the volumes stay modest. For example, in 2019, the last year before the six-year shutdown, trade through this route totaled to just about 73 million yuan, around $10.8 million.

Ground-level reaction

Gangtok trader and General Secretary of Indo-China Nathula border traders welfare association, Anil Gupta celebrated the official reopening of the passes. He highlighted the joy among the traders regarding the resolution of stranded goods and payment dues. He pushed for an updated goods list, specifically mentioning items like sugar and matchsticks, along with more trade permits and permission for overnight stays. On the Chinese side, Gong Shijun, head of the Yadong county government, called it a new phase of mutually beneficial cooperation.

Historical significance

When Nathu La first reopened in 2006, it was explicitly perceived  as reviving the old Silk Route's commercial links between the two countries. Chinese officials are echoing the same language today. Gong Shijun, head of Yadong country, highlighted Yadong's historic role as a gateway on the southern branch of the ancient Silk Road, connecting China with South Asia. Interestingly, among the three passes, Lipulekh was actually the first pass to open for trade, back in 1992, followed by Shipki La in 1994, with Nathu La only joining in 2006. Taken together, the three form a three-decade arc of trade-based confidence-building between the two countries.

Economic significance

The reopening of the passes restores livelihoods for border communities that had gone without formal trade for years. It also clears pending dues that were built up during the closure period. Across all three passes, the resumption is expected to benefit traders, local businesses, and small industries in these border regions, and could help stabilise prices of goods imported from China. That said, trade economists are quick to note that the financial volume moving through these Himalayan passes remains a small fraction of overall India-China trade, most of which still moves by sea and port logistics.

Infrastructural significance

The Government of India has approved  ₹770.25 crore for widening and upgrading National Highway 717A (NH-717A), from Bagrakote to Ranipool. The project turns the route into a proper two-lane highway with paved shoulders to serve as a reliable, all-weather alternative to NH-10. The goal is simple: better connectivity to the China border. This road, called NH 717A, matters most at its Reshi-Rhenock section. That is because another road, NH 717B, branches off  towards Menla, a spot just 20 km from Nathu La and 25 km from Doklam. The real purpose behind this upgrade is to relieve NH 10 from its current traffic due to adverse weather conditions.  Here's the connection: NH 717A feeds into NH 10, then links via NH 310 straight to Nathu La. Together, these roads form one uninterrupted corridor from the plains to the border. A similar shift already happened at Lipulekh. There a motorable road completed in 2020 replaced the older system of mule and sheep transport, cutting both logistics costs and travel time by a considerable margin.

Religious significance

Lipulekh has been a vital route for the annual Kailash Mansarovar Yatra to Mount Kailash and Lake Mansarovar in Tibet. The Yatra has historically run via two routes, Lipulekh since 1981 and Nathu La since 2015. But it was suspended from 2020 because of COVID-19 and China's non-renewal of the arrangements. Now both countries have agreed to resume and expand the pilgrimage from 2026 onward, increasing the number of pilgrims considerably as a people-to-people exchange measure. Shipki La has also been added as an additional Yatra route this year, joining Lipulekh and Nathu La.

Diplomatic dimensions

But it may be noted that reopening itself is not tantamount to reconciliation. It reads instead as a calculated, incremental trust-building move unfolding even as the deeper strategic rivalry between the two nations remains firmly in place. India's approach here is a pragmatic one, cooperative on this specific front, while it continues to build strategic autonomy through other partnerships alongside.

This normalisation of partial trade relations began in 2024, with disengagement of troops at two long-standing friction points, Demchok and Depsang. This was followed by a revival of the Special Representatives dialogue, set in motion after Prime Minister Modi and President Xi Jinping met in Kazan during October 2024. By January 2025, the dialogue had matured into few concrete commitments: resuming the pilgrimage movement, restarting direct flights, and reviving the Expert-Level Mechanism on river data. All of this was finalised in August 2026, at the 24th round of the SR dialogue, which finally sealed the deal.

Still, caution lingers around this opening. Back in 2006, when Nathu La first reopened, Indian defense experts warned China could use it to boost intelligence access into India's northeast, prompting the Indian army to ensure that there'd be no troop reduction. Also, Lipulekh's reopening has drawn objection from Nepal, which claims that Kalapani-Lipulekh-Limpiyadhura region is their own sovereign territory.

Why it matters

The revival of these routes restored the historical silk route ties, dating back to 1992. 

Economically, it restores livelihoods of border dwellers, formalises commerce. Though volumes remain modest against total bilateral trade that's still dominated by sea routes.

Infrastructurally, it speeds up dual-use highway networks, NH 717A and NH 717B, which serve both trade logistics and border management near Doklam.

On the religious front, it restores and expands the Kailash Mansarovar Yatra across three routes after a six-year gap.

Diplomatically, it reflects a graduated, mechanism-tracked normalisation process. This process carefully keeps the unresolved LAC dispute and Nepal's territorial objection separate from the gains being made in trade and pilgrimage.

Conclusion

Reopening of Nathu La, Lipulekh, and Shipki La in 2026 marks a cautious but concrete step in normalising India-China ties after the Galwan-era freeze and the pandemic-driven closure. Its significance spans five tracks at once, historical, economic, infrastructural, religious, and diplomatic. Even as the LAC boundary dispute and Nepal's territorial claim remain unresolved in parallel, military caution continues alongside the trade and pilgrimage gains.

Soudamini Desai

MSc Economics

Research Analyst: Global Policy insights and Insights international

Founder: Arthshastra Group