India Plans to Ease Restrictions on Chinese Firms Bidding for Government Contracts

As per sources, the finance ministry is planning a major policy shift by removing restrictions placed on Chinese companies bidding for government contracts. The move comes as India looks to revive commercial ties with China at a time when diplomatic relations and border tensions have eased.

The restrictions were imposed in 2020 after a deadly military clash along the India-China border. Under these rules, Chinese firms had to register with a special government committee and seek political and security clearances before bidding for public projects. In practice, this shut them out of government contracts estimated to be worth between $700 billion and $750 billion.

Officials now say the government is working to remove the registration requirement for companies from neighbouring countries. “Work is underway to ease the current rules,” one source said, adding that the final call will be taken by Prime Minister Narendra Modi’s office.

The curbs had a visible impact on major projects. Soon after the rules came into force, China’s state-owned CRRC was barred from bidding for a $216 million train manufacturing contract. Since then, several ministries have complained that the restrictions have caused shortages of equipment and delays in key projects.

China plays a significant role in India’s economic growth mainly because it is deeply embedded in India’s infrastructure and manufacturing supply chains. Over the years, Chinese companies have become major suppliers of critical equipment used in sectors such as power, railways, metro projects, renewable energy, telecom, and heavy construction. Many Indian projects depend on Chinese-made machinery and components because they are available at scale, delivered quickly, and priced much lower than alternatives from Europe, Japan, or the US. When restrictions were imposed on Chinese firms in 2020, finding suitable and affordable replacements became difficult, leading to delays and cost overruns in several government projects.

“Many departments have asked for exemptions because these rules are slowing down projects in their sectors,” another source said. The finance ministry’s move reportedly follows these requests.

Data shows the impact was sharp. The value of new projects awarded to Chinese firms fell by 27% in 2021 to $1.67 billion compared to the previous year, according to a 2024 report by the Observer Research Foundation. Restrictions on importing Chinese equipment, especially for the power sector, have also slowed India’s plans to expand thermal power capacity to around 307 GW over the next decade.

A high-level committee led by former cabinet secretary Rajiv Gauba has also recommended easing the restrictions. Gauba is currently a member of a top government think tank.

The plan to relax the curbs comes amid improving ties between India and China. Last year, Prime Minister Modi visited China for the first time in seven years. Both countries agreed to strengthen commercial relations, especially after the US imposed steep tariffs on Indian goods and as Washington’s ties with Pakistan improved.

Since then, India and China have resumed direct flights, and New Delhi has simplified procedures for business visas for Chinese professionals. However, India is still moving cautiously. Restrictions on foreign direct investment from Chinese firms remain in place.

What about make in India

Easing restrictions on Chinese companies does raise questions around the “Make in India” initiative. Critics argue that reopening doors to Chinese suppliers could discourage Indian manufacturers, who may struggle to compete on price and scale, and could slow the development of local supply chains. What you think – do let us know in the comments section below.