As an embattled India negotiates the withdrawal of Chinese troops from its territory, the government has taken another step to restrict Chinese involvement in its economy.
The Finance Ministry said companies from countries bordering India would have to register in advance to bid to supply goods or services to government departments, banks, projects, state governments, or any institution that receives government funds.
Earlier, India restricted foreign direct investment coming in unhindered and last month banned 59 Chinese apps.
The move is aimed primarily at China since of all the other countries bordering India only China has any significant business with India. Other neighbors Pakistan, Bangladesh, Nepal, Bhutan and Myanmar don’t supply goods or services worth significant mention.
The government said it has amended the rules on “on grounds of defense of India, or matters directly or indirectly related thereto including national security.’’
“Any bidder from such countries sharing a land border with India will be eligible to bid in any procurement whether of goods, services, including consultancy services and non-consultancy services, or works, including turnkey projects, only if the bidder is registered with the competent authority,’’ the government said.
The new rule does not apply to India’s private sector sourcing goods and services from Chinese companies. Non-state run enterprises import a wide range of goods including smart phones, industrial goods, pharmaceuticals products, electronic goods, bicycles, textiles and firecrackers.
India’s state-run companies get significant supplies from Chinese companies in several critical sectors including telecom, power, plant and machinery, metro rail coaches, solar cells and raw material to make medicines. China, alongside the US, is among India’s biggest trading partners and last year had a trade surplus of more than $53 billion.
India’s state-run National Solar Mission, which aims to increase generation of power using solar energy, got 84% of its requirement from Chinese imports. India is making efforts to increase its use of conventional sources such as the solar and wind energy, and reducing exposure on the polluting coal.
A Parliamentary Committee in 2018 had cautioned the government against over-dependence on Chinese solar products, which it said contained toxic elements. The dumping of cheap Chinese products had killed the domestic industry which was exporting solar products to countries such as Germany, France and Italy. Dumping by Chinese companies led to a loss of 200,000 jobs in India, also leading to idle capacity, the committee said in its report.
Under the new rules, even if the bidder has got approval past the first stage, the tendering process will be canceled and restarted. Bidders unregistered until now will have to apply afresh to become eligible.
India’s Minister for Highways Nitin Gadkari July 1 spelled out India’s plans to bar Chinese companies from infrastructure, and roads construction projects and investment in micro, small and medium (MSME) companies.
In the end of June, India banned 59 Chinese Apps including the hugely popular TikTok, part of ByteDance that earned billions of dollars from its Indian business. The action followed intrusion into Indian territory by China, killing 20 Indian soldiers, and its obduracy in staying put on encroached land in Ladakh, in India’s northernmost tip.
In April, the government restricted foreign direct investment from countries sharing land borders with India.