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India is reportedly studying a proposal that seeks to place trade and procurement curbs on companies based in countries that are in illegal occupation of Indian territory. The proposal is specifically aimed at Pakistan and China, both of which occupy land that’s marked on our maps as Indian—the northeastern and northwestern parts of Jammu & Kashmir, for example.

The development assumes significance in the backdrop of an ongoing border stand-off with China in eastern Ladakh, where a violent face-off last month led to the death of 20 Indian soldiers. While India has boosted border defences, New Delhi has also initiated a diplomatic campaign to isolate Beijing. In the economic sphere, India has banned Chinese apps that had been proliferating on Indian smartphones.

No decision has been announced on the new curbs reportedly under consideration, but India is widely expected to tighten screws on Chinese investment in India. In April, the government had declared that foreign direct investment from countries sharing a land border with India could only enter with its permission, closing the automatic route that was open to Chinese investors earlier. Trade curbs, however, could be tricky. This is because several Indian industries are reliant on China for imported inputs. Domestic manufacturers of electronics, automobiles and pharmaceuticals could face disruption if container-loads from China are turned away. Delays in port and customs clearance over the past couple of weeks, a result of closer scrutiny of stuff from China, have already assumed crisis levels in some industries. Many analysts say that blocking off imports entirely would injure India more than it bothers China. While New Delhi needs to act against Chinese aggression, self-interest should guide our response.

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