Monday, August 8, 2022

India changes trade rules amid China standoff

In an important development, the Centre has amended General Financial Rules 2017 to enable imposition of restrictions on bidders from countries which share a land border with India on grounds of defence of India, or matters directly/indirectly related thereto including national security.

The Centre, in the new rule, being viewed as another counter to India’s recent clash with China at the Line of Actual Control, clarifies that bidders from countries bordering India, including China, Pakistan, Myanmar, Nepal and Bhutan, would now need security clearances and registration with a competent authority, namely Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT), to be eligible to procure goods and services on contractual terms with India.

The official statement further mentioned that political and security clearances from the Ministry of External Affairs and the Ministry of Home Affairs would be mandatory for such a registration. The statement, however, did not name any specific country.

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Previously in April, the Government of India issued a similar notice to monitor incoming foreign investment from countries bordering Indian land. There was no immediate reaction from the Chinese Embassy in New Delhi, but it is said to specifically pinch China, akin to the previous directive, which it had called a ‘discriminatory policy’, due to the presence of a large number of Chinese businesses sharing major interests in India.

The government added that such restrictions would be placed on all tenders issued from entities including public sector banks, public financial institutions, autonomous bodies, Central Public Sector Enterprises (CPSEs) and Public-Private Partnership projects, and also ordered state governments to abide by the new regulation invoking the provisions of Article 257(1) of the Constitution of India.

However, the new rules exempt procurement of medical supplies in the foreground of the Covid-19 pandemic till December 31, 2020. By a separate order, the government has also exempted countries under India’s development aid from the new rule which mandates prior registration. All new and pending tenders will be treated under the rules of procedure of the new amendment.

The move now essentially stymies Chinese corporations from getting away with easy public procurements without government screening.

It should also be noted that the amendment comes in furtherance of Centre’s growing hostility towards Chinese interests. The government had also banned 59 Chinese apps, including TikTok and UC Browser, citing security concerns, after the Galwan Valley incident in June which killed 20 Indian soldiers, denting China’s reputation as a neighbour-bully further.

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