India is preparing to roll back one of its most consequential post-2020 economic measures. A Reuters report on January 8, 2026, indicates that India’s Finance Ministry is considering scrapping the five-year-old curbs that barred Chinese firms from bidding for government contracts. The move follows the recommendation of a high-level committee led by the former cabinet secretary Rajiv Gauba, though the final decision rests with the Prime Minister’s Office. If implemented, the change would mark a significant turn in India’s approach to balancing national security concerns with economic development imperatives.
The China Curbs
The curbs were introduced in 2020 by the Department of Expenditure under the Ministry of Finance, in the aftermath of a violent clash between Indian and Chinese troops along the Line of Actual Control. The restrictions barred Chinese firms from competing for Indian government contracts worth over $700 billion. In the immediate aftermath of the restrictions, China’s state-owned China Railway Construction Corporation (CRCC) was disqualified from bidding for a $216 million contract to manufacture trains. The value of new projects awarded to Chinese bidders dropped 27% to $1.67 billion in 2021.
The sanctions required rigorous registration and multi-agency security clearance for bidders from countries sharing land border disputes with India before participating in public procurement, citing national security. These mandates were applied across all departments under the central and state governments, public sector banks, autonomous bodies, and Central Public Sector Enterprises (CPSEs). As a result, the presence of Chinese bidders in government tenders, particularly in infrastructure, power, and manufacturing-linked projects, declined sharply. While the Department of Promotion of Industry and Internal Trade (DPIIT) was granted absolute authority to qualify or cancel entities on national security grounds with public justification, the recent news of a petition to rescind these measures signals a potential recalibration of India’s engagement with Chinese firms.
The Economics of De-Securitisation
According to the analysis, removing Rule 144(xi) will have varying impacts across sectors, with some companies facing minimal consequences while others will see substantial changes to the competitive landscape. Sensitive sectors like telecommunications and defence are likely to remain insulated, while thermal and renewable energy segments will face significant competition. The relaxation is primarily aimed at thermal power, which is targeting an expansion of capacity to 307 GW, and renewable energy, where high domestic costs have slowed progress. The restrictions had particularly impacted India’s thermal power sector by limiting access to Chinese equipment and slowing India’s plans for expanding power generation capacity.
Shares of Bharat Heavy Electricals (BHEL) and other capital goods firms fell sharply following the news. BHEL’s stock declined as much as 17% on January 8, 2026, reflecting investors’ sensitivity to the prospect of renewed Chinese competition in the sector. The sell-off extended across the sector, including firms such as Hitachi Energy India, ABB India, Siemens, Afcons Infrastructure and Larsen & Toubro. The stock market reaction reflects concerns that renewed Chinese participation in public procurement could pressure margins and weaken pricing power, despite strong underlying fundamentals such as rising electricity demand, a government-led infrastructure push, and policy recognition of the need for additional thermal capacity to ensure energy security and reliable baseload power.
It is expected that state-owned enterprises such as Power Grid and NTPC could benefit from increased competition, as the entry of Chinese firms may help expedite project execution and reduce costs, especially on competitively bid contracts.
India and China Test a Reset
This shift is a result of the gradual stabilisation of bilateral relations between India and China. Prime Minister Narender Modi’s meeting with Chinese President Xi Jinping in Tianjin on the sidelines of the Shanghai Cooperation Organisation (SCO) summit in September 2025, his first in seven years, signalled a potential thaw. The meeting was widely viewed against the backdrop of evolving global realignments, strains in India-US relations, and an emerging post-American international order. The highlight of the event was Modi’s invitation to Xi to attend India’s BRICS summit in 2026, which the Chinese leader accepted while pledging support for India’s BRICS presidency. Leaders of both countries had earlier met in 2024 on the margins of the BRICS summit in Kazan, Russia, where they agreed to frame the relationship as a partnership rather than a rivalry and to view each other as development opportunities rather than strategic threats. Complementing these high-level signals, functional cooperation has also resumed. On October 26, 2025, India and China resumed direct flight services between Kolkata and Guangzhou after about five years of suspension.
The proposed scrapping of curbs on Chinese firms threfore represents a pragmatic recalibration of India’s strategy rather than a wholesale dilution of post-2020 security posture. Market volatility following the announcement points to investor anxieties over competition and margin pressures. Even so, the move highlights a structural imperative for meeting India’s expanding energy and infrastructure needs. How effectively New Delhi navigates this balance will shape the future of India’s engagement with China in an increasingly fragmented world.