India to lift ban on Chinese firms bidding for contracts
What's the story
India is all set to lift a five-year-old set of restrictions on Chinese companies bidding for government contracts. The move is part of New Delhi's efforts to revive commercial ties. The restrictions were first imposed in 2020 after a deadly clash between Indian and Chinese troops. They mandated Chinese bidders to register with an Indian government committee and secure political and security clearances.
Contract impact
Restrictions impacted Chinese firms' participation in Indian contracts
The restrictions imposed in 2020 effectively barred Chinese firms from competing for Indian government contracts worth an estimated $700 billion to $750 billion. The measures had a major impact, with China's state-owned CRRC being disqualified from bidding for a $216 million train-manufacturing contract just months after the restrictions were announced.
Potential benefits
Easing curbs could alleviate project delays, shortages
The Finance Ministry's plan to ease the restrictions comes after requests from other government departments facing shortages and project delays due to these 2020 measures. A high-level committee led by former cabinet secretary Rajiv Gauba has also recommended relaxing these restrictions. The move could potentially ease some of the challenges that have arisen since their implementation.
Capacity challenges
China's power sector equipment curbs hinder India's capacity expansion
Notably, restrictions on imports of power sector equipment from China have hampered India's plans to expand its thermal power capacity to nearly 307 GW over the next decade. The news of possible increased competition from Chinese firms in contracts led to a decline in shares of equipment manufacturer Bharat Heavy Electricals and infrastructure giant Larsen & Toubro by 10.5% and 3.1%, respectively, at Thursday's close.
Information
Modi's visit to China and future trade deal prospects
The context includes US President Donald Trump's 50% tariff on Indian goods and Washington's growing ties with Pakistan. Despite improved relations between India and China, New Delhi remains cautious as restrictions on foreign direct investment from Chinese firms continue.