TENSION BETWEEN INDIA AND CHINA ESCALATES

India is considering multiple, comprehensive measures to curtail China’s economic dependence on the country, targeting trade , investment, and project services in the wake of hostilities at the border. These are expected to include limits on Chinese firms’ involvement in government contracts and infrastructure programs, higher tariffs on imported Chinese finished goods as well as closer review of free trade arrangements that the country uses to indirectly export goods to India.

According to Economic times, a high-level meeting, likely to be attended by key stakeholder ministers and top officials from the Prime Minister’s Office (PMO), is expected soon to discuss the details and the extent of measures.

“Measures are being examined… All pros and cons of how and when as also their repercussions on Indian businesses will be looked into,” said a government official.

On the trade side, tariff as well as non-tariff measures could be put in place to discourage China’s imports which added up to $70 billion in FY19, which was more than any other country. In FY19, India had a trade deficit of $53 billion with China, and attempts to address it have made little progress. Chinese firms have a significant portion of the cell phone and electronics industries in India. The government should take steps to curtail Chinese imports while at the same time creating an atmosphere for domestic production of these goods.

India will also review its free trade arrangements with other countries to determine whether China is using them to enter the local market. India has already left the Regional Comprehensive Economic Partnership (RCEP) negotiations, which includes China among others, on the grounds that there is no safeguard against a further increase in exports to India from that country. In addition, stringent quality standards and controls could be introduced to contain the country’s goods inflow.

Various options are being examined by the law ministry on the exact contours of the clause to ensure it cannot be challenged and meets international norms. The omnibus clause could cover all countries, the official said, though it is primarily aimed at Chinese companies.

One of the first sectors to introduce the clause could be roads and highways before it is expanded to others and eventually includes public sector units, said the officials. The ministries of road transport and highways and law are already in discussions to finalise the wording of the new clause, one official said.

The government has sought to cancel and rework contracts with state-owned telecommunications firms Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) to keep Chinese vendors out of security issues. Additional criteria could be introduced to ensure Indian suppliers of goods and services secure contracts awarded by the government as well as public sector entities. The Ministry of Law is examining the feasibility of introducing such a clause examining the feasibility of introducing such a clause in contracts in accordance with restrictions or strict conditions imposed by some other countries on Indian firms from contracting.

“These stiff criteria essentially are barriers to ensure that only local companies can participate,” the official said, adding that such restrictions imposed by other countries are also being examined in detail.

The exercise was already underway as part of the Atmanirbhar government’s mission, or self-reliance, and gained importance following changed border circumstances, he said. The cabinet secretary, who also chairs a committee to boost local manufacturing, has had discussions with various ministries dealing with infrastructure projects on how to boost local sourcing of both goods and services.

The lowest bidder is generally accorded prior security clearance but there’s a growing view that a more stringent framework is needed, said the official cited above.

Some bids in which Chinese companies were roped in as partners by an Indian company in the roads sector have been cancelled recently, including one in Nagpur. The government has already reserved supply contracts of up to ₹200 crore for local producers. The government is likely to revisit these criteria to ensure wider participation by domestic companies, another official said.

Source:https://economictimes.indiatimes.com/news/economy/policy/india-set-to-erect-a-great-wall-against-chinese-companies/articleshow/76455684.cms