India May Lift Curbs on Chinese Firms in Government Tenders After Five Years
India is considering a major policy shift by removing restrictions imposed on Chinese companies bidding for government contracts, a move that could significantly impact infrastructure development, manufacturing, and power projects. The proposal, currently under review, comes nearly five years after the curbs were introduced following heightened border tensions between the two countries in 2020.
Background of the Restrictions
The restrictions were enforced in 2020 after a deadly border clash, amid concerns related to national security and strategic dependence. Under the policy, Chinese firms were required to register with a government committee and secure political and security clearances before participating in public procurement.
These measures effectively sidelined Chinese companies from competing for government contracts estimated to be worth between $700 billion and $750 billion, significantly altering India’s procurement landscape.
Why the Government Is Rethinking the Policy
According to government sources, the finance ministry has proposed scrapping the registration and clearance requirements. The move follows repeated requests from several ministries that have faced shortages of equipment and delays in project execution due to the absence of Chinese suppliers.
A high-level committee led by a former cabinet secretary has also recommended easing the curbs, citing operational challenges and rising costs across key sectors.
Key Challenges Caused by the Curbs
- Delays in large-scale infrastructure and transport projects
- Limited supplier options leading to higher project costs
- Slower execution of power and energy capacity expansion plans
One notable example was the disqualification of a major Chinese rolling stock manufacturer from a $216 million train manufacturing contract soon after the rules were implemented.
Impact on Power and Infrastructure Sectors
The restrictions on importing Chinese power equipment have particularly affected India’s thermal power ambitions. The country plans to expand its thermal capacity to nearly 307 GW over the next decade, a target that has faced hurdles due to constrained access to cost-effective equipment.
Market participants reacted swiftly to reports of a possible policy change. Shares of leading Indian engineering and infrastructure companies declined, reflecting investor concerns over renewed competition from Chinese firms in government tenders.
Changing Geopolitical and Trade Dynamics
The proposal to ease curbs comes amid improving diplomatic and commercial engagement between India and China. Over the past year, both countries have taken steps to restore direct connectivity and simplify business travel, signalling a cautious thaw in relations.
At the same time, evolving global trade dynamics, including higher tariffs imposed by the United States on Indian goods, have prompted New Delhi to reassess its external economic partnerships.
Despite the potential easing of procurement rules, India is expected to remain careful. Restrictions on foreign direct investment from Chinese companies are still in place, underlining a calibrated approach rather than a complete policy reversal.
What Lies Ahead
The final decision on lifting the curbs will rest with the Prime Minister’s Office. If approved, the move could ease supply bottlenecks, accelerate stalled projects, and reshape competitive dynamics in India’s public procurement ecosystem.
For investors and industry stakeholders, the policy shift could have far-reaching implications across infrastructure, capital goods, and energy sectors in the coming years.
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