India had better watch out. The dumping of Chinese goods in Indian markets acutely debilitating for India already could get further exacerbated, thanks to the trade war between China and the US. So far, India has neither been adequately watchful nor forthright in dealing with Chinese dumping with the result that Indian cottage and small scale industry is severely crippled with Chinese undercutting. It would be suicidal of India to continue ignoring the Chinese dumping.
If the Americans can protect their indigenous industry by imposing heavy duties on a range of Chinese products, so can we. The unemployment problem in India is the single biggest issue that is going against the BJP for next year’s general elections and it can ill afford to let this pass. There can be little doubt that cheap imports from China are a prime reason why Indian cottage and small scale industry is in utter disarray and thousands of small businesses have had to shut down, forcing people on the streets.
Keeping up good relations with Beijing is a legitimate priority in times when under the unpredictable Donald Trump, we cannot assume that the US would come to our aid if the Chinese gang up with Pakistan to take us on militarily at some stage. But in keeping up, we cannot put our economic sovereignty at stake. We need to put our foot down beyond a point. Some tariffs need to be imposed and revised and a keen watch kept on the smuggling route to plug dumping without payment of duties.
The unscrupulous traders who are out to make a quick buck by selling smuggled goods that are clandestinely brought inside the country need to be dealt with in an exemplary manner that establishes a strong deterrent. The Parliamentary Standing Committee on Commerce said in its 145th report submitted to the Lok Sabha last month that China’s trade practices in India — selling its oversupply to another country, depressing prices and hurting native manufacturing — stand as a testament to Beijing’s policy of making hay while the Indian government looks the other way. With the heat on Chinese imports into US, China could well step up its dumping further in India unless this country takes steps to prevent this proactively. India’s widening trade deficit with China, already a subject of much concern in Indian trade circles could worsen if that happens. The standing committee report cited solar panels as the main product being dumped into India. China is the world’s largest producer of photovoltaic panels.
Dumping of Chinese solar panels in India, once a major exporter of the product, is estimated to have cost two lakh jobs, according to the panel. India was one of the major exporters of solar products between 2006 and 2011 before China started dumping its products at the cost of Indian manufacturers. “Presently, the exports from India have been decimated and brought to a standstill,” the report said, adding that the government must take strong note of such dumping.
In the life-saving drugs category, the dependence on Chinese imports is as much as 90 per cent. Significantly, China has increased the prices of bulk drugs 11-fold during the last two years. Cheap Chinese imports have resulted in 35 per cent closure of power looms in Surat and Bhiwandi, according to the Commerce ministry report. About 85-90 per cent of toy market space is commanded by Chinese products, the report says. It has affected 50 per cent of the domestic toy industry.
Chinese share in India’s imports grew from 11.6 per cent in 2013-14 to 16.6 per cent in 2017-18. Indian exports grew by 9.8 per cent last year. This was accompanied by smuggling which, too, contributed to dumping. But why is China able to make its exports so attractive to Indian importers, is a pertinent question. The Chinese government gives an effective rebate of 17 per cent to its exporter companies. As per the committee, this results in Chinese goods being 5-6 per cent cheaper than their Indian counterparts, making it lucrative for Indian importers.
On account of costlier energy, finance and logistics, Indian goods are costlier by about 9 per cent in the global market. Chinese industry gets loans at 6 per cent, compared to 11-14 per cent in India. Logistics costs are 1 per cent of the business in China, compared to 3 per cent in India.
The parliamentary committee has identified costly capital in India vis-à-vis China as a key debilitating factor for Indian trade boost. It has suggested product specific strategies for improving the trade balance, emphasizing the accountability of pertinent institutions, including the Directorate General for Anti-Dumping and Allied Duties and the Risk Management Division of the Central Board of Indirect Taxes and Customs.
The Committee found that Chinese manufacturers were re-routing their products through the markets of other countries that India has Free Trade Agreements (FTA) with. The unscrupulous imports from China are also on account of influx of under-invoiced Chinese goods, goods brought in through mis-declaration and outright smuggling, it says.
These illegalities have its share of adverse effect on domestic industry, the report declared. In April to December 2017-18, as many as 1,127 cases of smuggling have been registered by India, recovering more than Rs 5.4 billion worth of Chinese goods. But this is only the tip of the iceberg. Actual smuggling figures would be much greater.
However, it also calls for measures such as encouraging people to buy Indian products, popularising ‘Swadeshi apnao’ (consume domestic goods) and generate positive public opinion about Indian goods, which, trade experts say, contribute little to revive domestic industry. There is no doubt that India needs to wake up on the Chinese dumping front. If it fails, Indian industry would suffer irreparable damage.
Kamlendra Kanwar is a political commentator and columnist. He has authored four books.