Center Implements Stricter Rules for Business with ‘Hostile Countries’ China and Pakistan

Center Implements Stricter Rules for Business with 'Hostile Countries' China and Pakistan
Center Implements Stricter Rules for Business with 'Hostile Countries' China and Pakistan
Center Implements Stricter Rules for Business with 'Hostile Countries' China and Pakistan
Center Implements Stricter Rules for Business with 'Hostile Countries' China and Pakistan

Center Implements Stricter Rules for Business with ‘Hostile Countries’ China and Pakistan

Center Implements Stricter Rules for Business with ‘Hostile Countries’ China and Pakistan

Center Implements Stricter Rules for Business with ‘Hostile Countries’ China and Pakistan

In a move aimed at bolstering national security and protecting economic interests, the government initiated a significant policy change on July 23, 2020. The decision restricts purchases for public projects from companies located in countries sharing a land border with India. Although the targeted countries are not explicitly named, the policy is primarily directed at countries with which India has had strained relations, such as China and Pakistan.

Enhanced Screening and Registration Requirements

The government has recently amended its July 2020 order, making it mandatory for all bidders with any form of “commercial arrangement” with entities from border-sharing countries to undergo prior screening and registration. This change applies to both domestic and overseas corporate entities. The goal is to ensure greater scrutiny and transparency in business relationships with companies associated with nations of security concern.

Communication to State Governments

The Union government has communicated these measures to all states, instructing them to obtain prior approval before engaging in business relationships with entities from neighboring countries deemed hostile. The aim is to minimize potential security risks and to safeguard national interests.

Background and Rationale

The decision to impose these regulations was prompted by security inputs received well before the October 7 terror attack in Israel. The government is particularly concerned about private firms in some states attempting to engage Chinese contractors in infrastructure projects. This has resulted in several private infrastructure projects being stalled due to security concerns.

In 2020, India initially restricted purchases for public projects from countries sharing a land border, citing national security and the need to protect domestic industries. This policy was enacted in response to heightened tensions and conflicts along India’s borders, including the June 2020 clashes in eastern Ladakh that led to casualties on both sides.

Additionally, the Indian government took various measures to reduce its economic reliance on China, including imposing anti-dumping duties on Chinese products, launching the “Make in India” campaign, and introducing the production-linked incentive (PLI) scheme to promote domestic manufacturing.

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