India plans to scrap curbs on Chinese firms bidding for govt contracts, sources say

India's finance ministry plans to scrap five-year-old restrictions on Chinese firms bidding for government contracts, two sources said, as New Delhi seeks to revive commercial ties in an environment of eased diplomatic and border tensions.

The curbs, imposed in 2020 after a deadly clash between the countries' troops, required Chinese bidders to register with an Indian government committee and obtain political and security clearances.

The measures effectively barred Chinese firms from competing for Indian government contracts that were estimated to be worth $700 billion to $750 billion.

"Officials are working to remove the registration requirement for bidders from bordering nations," one government source said, declining to be named as they were not authorised to speak publicly.

The final decision will be made by Indian Prime Minister Narendra Modi's office, both the sources said.

The restrictions had a significant impact: Months after they were unveiled, China's state-owned CRRC was disqualified from bidding for a $216 million train-manufacturing contract.

The Ministry of Finance's plan to ease curbs followed requests from other government departments that are facing shortages and project delays due to the 2020 restrictions.

"Several ministries have requested exemptions to overcome the constraints that could derail projects in their sectors," the second government source said.

Reuters is the first to report on the plan to ease restrictions on Chinese firms in Indian government contracts.

Soon after India imposed its restrictions, the value of new projects awarded to Chinese bidders fell 27% from a year earlier to $1.67 billion in 2021, according to a 2024 report from the Observer Research Foundation.

Specifically, curbs on imports from China of equipment for the power sector have hindered India's plans to raise its thermal power capacity to about 307 GW over the next decade.

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

India's finance ministry and the prime minister's office did not respond to Reuters requests for comment.

Trump's impact

Last year, Modi visited China for the first time in seven years and agreed to foster deeper commercial ties with Beijing following US President Donald Trump's 50% punitive tariff on Indian goods and in light of Washington's warming relations with Pakistan.

Following the visit, India and China restarted direct flights and New Delhi cut red tape to speed approvals for business visas for Chinese professionals.

Even though ties between the two Asian giants have improved, India's approach still appears cautious, with restrictions on foreign direct investment from Chinese firms still in place.

Meanwhile, the US continues to send mixed signals about signing a Washington-New Delhi trade deal, which experts said could allow for the India-China relationship to improve.