India has toughened trade rules for neighboring countries in a move seen aimed at China, as a dispute along their Himalayan borders plunges ties between the Asian giants to their lowest point in decades.
In fresh rules issued this week, India said companies from countries with which it shares land borders would need political and security clearances from the foreign and interior ministries to bid for government contracts.
The government said the move was meant to “strengthen the defense of India and national security.”
While the rules do not name China, the new curbs will impact Chinese companies looking to invest in infrastructure projects in India, according to trade experts.
“It is large projects which will be affected. These are big ticket investments,” points out Biswajit Dhar, a trade analyst and professor of economics at New Delhi’s Jawaharlal Nehru University. “India depends a lot on China for such projects.”
It is the latest in a series of measures aimed at Chinese investment in India as New Delhi reevaluates its economic ties with Beijing.
Last month, India banned 59 mostly Chinese apps, including the hugely popular TikTok, in what federal minister Ravi Shankar Prasad described as a “digital strike” meant to safeguard people’s data.
In April, the government announced that it would screen foreign investment from countries with which it shares a land border.
While these measures will have very limited impact on China’s much bigger economy, they will put a roadblock on a trade relationship that blossomed for years and made China India’s second-biggest trading partner.
But even as New Delhi tries to wean itself from dependence on Beijing, the deteriorating economic ties will come at a cost, since China has a large footprint in projects from infrastructure to technology.
“The big question is, you are going to deny China entry into India’s infrastructure projects.Would anyone else step in and who would that be?” points out Dhar. “If you look at the bigger picture, it is China which has the deep pockets in terms of making investments and supplying equipment.”
As India tries to reduce its dependence on Beijing, it is calling on American companies to increase investment in sectors such as technology, energy, defense and space.
At the “India Ideas Summit” held online by the U.S India Business Council earlier this week, Indian Prime Minister Narendra Modi said that the “the rise of India means a rise in trade opportunities with a nation that you can trust.”
At the same forum, US Secretary of State, Mike Pompeo said India had a chance to move “supply chains away from China and reduce its reliance on Chinese companies in areas like telecommunications, medical supplies and others.”
“India is in this position because it has earned the trust of many countries around the world, including the United States,” Pompeo said.
Calls for closer ties with the United States have been growing since India’s military confrontation with China.
New Delhi and Beijing have deployed thousands of soldiers along their undemarcated borders in the eastern Ladakh state where a clash killed 20 Indian soldiers in June.
Talks are continuing to defuse the standoff but efforts at disengagement have made only limited progress so far.
