India considered a range of economic measures aimed at Chinese firms

India is considering a economic measures against China, including limiting the country’s access to India’s huge market, as a response to its aggression on the Line of Actual Control (LAC) even as the Indian armed forces have been put on highest level of alert.

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Key-Points

The government is considering trade and procurement curbs targeting China.

It is also increasing scrutiny of Chinese investments in many sectors, and weighing a decision to keep out Chinese companies including 5G trials.

Recently, the Union Minister for Road Transport and Highways has announced that Chinese companies would not be allowed to take part in road projects.

The economic measures taken by India could potentially cost Chinese companies billions of dollars in contracts and future earnings.

For TikTok, one of the 59 apps banned, India is the biggest overseas market with more than 100 million users. Thus, the app is anticipating a loss of more than $6 billion, most likely more than the combined losses for all the other Chinese companies behind the other 58 apps banned in India.

A move to restrict Chinese companies from India’s 5G rollout would also have the similar effect of costing hundreds of millions of dollars in potential revenue.

Moreover, losing Indian market would come at a time when the Chinese economy is facing its own challenges in the wake of the pandemic and facing increasing barriers in many Western countries.

India-China Trade

In the India-China economic relationship trade is lopsided in China’s favour as China’s exports to India account for less than 3% of its overall exports. Thus China could inflict immediate economic pain if it chose to.

In 2019-20, India’s imports from China accounted for $65 billion out of two-way trade of $82 billion.