India moves fast to cut off China's economic muscle, gets US support

After the ban on 59 Chinese apps, India on Wednesday took two more decisions that are likely to cause economic injury to China.

In a major development, India has received the first significant international response on its decision, to ban 59 Chinese apps, from the US. Mike Pompeo, the US Secretary of State, has supported India's action against China, saying that India's clean app approach will strengthen its national security, sovereignty and unity. The US has also followed India's path and has taken major actions against some Chinese companies.

The border tension between India and China escalated on June 15 when 20 Indian Army personnel were martyred after violent clashes with Chinese troops along the Line of Actual Control (LAC) in Galwan Valley of eastern Ladakh.

After the ban on 59 Chinese apps, India on Wednesday (July 1) took two more decisions that are likely to cause economic injury to China. The first decision is that India will no longer give entry to Chinese companies in its highway projects. The second decision taken by the Ministry of Communications cancelled the 4G Upgradation tender of BSNL, the state-run telecom company. The new tender will be released in the next two weeks and it will exclude Chinese companies that provide equipment for network upgradation.

Let us explain in details about the decision for the highway projects. Union Road Transport Minister Nitin Gadkari clearly stated that India will not allow Chinese companies to participate in highway projects. In addition, if a Chinese company makes a joint venture with a company in India and wants to acquire a road construction contract, then India will not allow it.

The Ministry of Road Transport will soon formulate a new policy, which will have rules banning Chinese companies and relaxation in regulations for domestic companies, which will give more opportunities to domestic companies in big projects.

India is now going to ensure that Chinese companies don't get a chance in its infrastructure projects. Foreign investment will be welcomed, but doors will be closed from all sides for Chinese investment. Notably, Chinese companies have been very interested in India's infrastructure projects. By 2020, China had planned to invest around Rs 1.5 lakh crore in the field of infrastructure be it in highways or railways. Many big Chinese companies in infrastructure have been looking at India as a big market.

If China doesn't mend its ways then it will get a befitting reply from every side, be it along the border or in trade. If China has been troubled by the ban on some apps, then one can only imagine what will happen to China now when India is taking tough decisions one after another in the matter of trade. India has also made it clear that in order to increase the capacity of small industries of the country, it will seek help from investors of other countries on technology and research, but will keep the Chinese investors away from this area too. In 2019, Prime Minister Narendra Modi had said that Rs 100 lakh crore will be spent only on infrastructure by 2024. 

Let us now explain how India has responded economically to what China has done at the border. There have been decisions to snatch up Chinese companies' business in the railways and telecom sectors. As such, state telecom companies have already been told not to buy equipment from Chinese companies to upgrade the network and private telecom companies asked to reduce their dependence on Chinese companies.

Several large Chinese companies have reviewed the contracts of signalling systems and underground corridors in several railway projects, and have indicated signs of cancellation. For example, the Shanghai Tunnel Engineering Company of China had received a contract of around Rs 1,500 crore to build the underground portion of the rapid rail project between Delhi and Meerut.

Apart from this, the government had made a new rule for its E-Marketplace i.e. GEM, in which any seller will have to tell the country of origin of the goods to sell the goods on the E-Marketplace. The effect of this decision will be that people who used to import goods from China and sell it on the government's E-Marketplace- GEM will be discouraged and this will give a boost to Make in India.

When Chinese companies were doing economic encroachments around the world and increasing their stake in companies that were weakened during the coronavirus pandemic, India also changed its FDI rules. It was decided that any company and individual of the countries that have borders with India will have to take government approval before investing in any area of ​​India.  This decision also troubled China at that time.

There is another major reason why China is upset with the ban on 59 Chinese apps in India. China envisions itself as the global tech power but this small step of India is destroying China's dream.