By Zarak Khan | 2026-01-22

India's government is under mounting political pressure over a proposal to ease restrictions on Chinese investment, a move critics say risks weakening New Delhi's security posture despite unresolved tensions with Beijing along their disputed border.

Pushed by the Finance Ministry, the proposed changes would relax five-year-old curbs on Chinese firms bidding for Indian government contracts, Reuters reported January 8.

The move could reopen access to strategically sensitive sectors, including infrastructure, power equipment and electronics manufacturing.

Restrictions in place since 2020

India introduced those restrictions on China after the 2020 Galwan clash in eastern Ladakh, the deadliest fighting between the two countries since 1975. The conflict, which killed at least 20 Indian soldiers, marked a sharp and lasting deterioration in Sino-Indian relations.

In response to the clash, India stepped up scrutiny of companies from countries sharing a land border with it, requiring political and security clearances before they could bid for public contracts. The measures effectively shut Chinese firms out of government procurement, a market estimated at between $700 billion and $750 billion annually, Reuters said.

A Chinese joint venture in 2020 lost a chance to manufacture 44 semi-high-speed train sets when the Indian Railways Ministry cancelled the tender. The contract went to an Indian firm in January 2021 after the ministry revised the tender to favor domestic bidders.

Uproar over meeting with CCP

The controversy over rapprochement intensified after leaders of the ruling Bharatiya Janata Party (BJP) and its ideological parent, the Rashtriya Swayamsevak Sangh (RSS), hosted a senior Chinese Communist Party (CCP) delegation on January 13, days after reports emerged of the proposed policy shift.

The conferees "discussed at length the means to advance inter party communications" between the two ruling parties, Dr. Vijay Chauthaiwale, a BJP leader overseeing the party's foreign affairs department, tweeted.

India's main opposition party has seized on recent trade data to accuse the government of a "carefully calibrated capitulation" toward Beijing.

"China has just announced that it had a record trade surplus of $1.2 trillion in 2025. This means that its trade surplus with India alone was about 10% of the total," Jairam Ramesh, a senior leader of the Indian National Congress, tweeted January 14.

Ramesh cited the January 13 meeting between the BJP–RSS and CCP delegations as part of the purported surrender to Chinese economic interests.

Unresolved tensions

New Delhi's nascent courtship of the CCP comes even as border tensions fester.

Friction points along the Himalayan frontier remain unresolved. Both countries continue to upgrade strategic infrastructure and reinforce forward deployments.

The 2020 clashes left a deep imprint on Indian politics and nationalism, Amar Jaipal, a New Delhi-based security analyst, said.

"The restrictions on Chinese trade after the 2020 clashes were not bureaucratic formalities. They were a political and strategic signal after Chinese aggression on our borders that killed our soldiers," Jaipal told Focus.

More recently, New Delhi rejected objections from Beijing over an upcoming Bollywood film, "Battle of Galwan," which depicts the 2020 clash. The controversy over the film reflects the continued sensitivity of the episode in Indian politics.

Easing curbs could undermine domestic manufacturing and deepen India's economic dependence on China, industry groups have predicted.

Allowing Chinese firms greater access would "jeopardize domestic manufacturing, create banking stress and cause mass unemployment," the Seamless Tube Manufacturers' Association of India wrote to the country's Steel Ministry, Rediff reported January 15.

Without restrictions in place, Chinese suppliers will flood the Indian market with underpriced steel tubes and pipes and drive Indian firms out of business, the association said.

"India has not yet learned how to insert its own industrial output into the Chinese market at scale," Observer Research Foundation visiting fellow Tushar Joshi wrote last December.