“
Chinese imports have thrown a spanner in the wheel of India’s economic progress per se, and the industrial sector in particular,” the parliamentary standing committee on commerce voiced in its report tabled last week.
Beginning with hard numbers that establishes its basic premise of huge and constantly growing Sino-Indian trade imbalance, the report dwells on the boiling debate on the market economy status to China, echoing a similar line of thought implicit in the US-initiated trade war.
Identifying the problem of costly capital in India vis-à-vis China, it suggests product specific strategies for improving the trade balance, underlining 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. Straddling the South East Asia, underdeveloped members of ASEAN have served as hubs for Chinese exporters to circumvent anti-dumping and countervailing duties, it says.
It has recommended a relook at the Least Developed Countries (LDC) arrangements and joint verification/ certification mechanism with the partner countries.
ALSO READ: Increased aluminium imports to hit realisations of domestic producers
The report has also expressed skepticism about India's ongoing negotiations with these nation and China, among others for the Regional Comprehensive Economic Partnership (RCEP) agreement.
It expressed hope that India might offer to reduce its tariffs by 74-86 per cent of all goods.
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.
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.
We look at the committee’s view from the perspective of data to understand the depth of the trade imbalance.
The big picture
16.6%: Chinese share in India’s imports grew from 11.6 per cent in 2013-14 to 16.6 per cent in 2017-18. This came as a result of Chinese imports growing at a staggering 20 per cent in 2017-18, compared to 9 per cent growth four years ago. India exports grew by 9.8 per cent in 2017-18.
$50 bn: In a decade to 2017-18, India’s exports to China rose by $2.5 billion. In the same period, China’s imports in India rose by $50 billion. India registered a trade deficit of $157 billion in 2017-18.
5%: Chinese government gives an effective rebate of 17 per cent to its exporter companies.
This, the committee says, results in Chinese goods being 5-6 per cent cheaper than their Indian counterparts, making it lucrative for Indian importers.
9%: 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.
294: Of the 803 licenses provided by the Bureau of Indian Standards (BIS) to foreign manufacturers selling in India under the Foreign Manufacturer Certification Scheme (FMCS), 294 licenses for 55 products have been granted to Chinese manufacturers.
A similar scheme has also provided 9,274 registrations for information technology and electronics products. Of this, 5857, 0r 64 per cent, registrations have been granted to Chinese manufacturers.
8%: Despite the fact that 75-80 per cent of Chinese steel products are covered under anti-dumping duty, their imports have increased 8 per cent in 2017-18.
Sectors that have been impacted
Industry Key number and how badly it hurts Recommendations
Pharmaceuticals 1,200%: In the life-saving drugs category, the dependence on Chinese imports is as much as 90 per cent. As much as 75% of the APIs (Active Pharmaceutical Ingredients) used in the formulations of essential drugs in the National List of Essential Medicines (NLEM) are sourced from China.
China has increased the prices of bulk drugs 11-fold, or 1,200 per cent, during last two years. Revive India’s fermentation based API capability.
Solar 90%: Chinese solar imports form 90% of the India’s market share directly or indirectly through their offshore companies across South East Asia. Further, its dumping prices in India are lower than that of the price at which they sell in Japan, Europe or the US.
Under the Special Incentive Package Scheme, no domestic manufacturer has got any capital subsidy till now. Domestic industry must pursue innovation that will help in further reduction in price per unit.
Anti-dumping duty may be levied in a differential manner to facilitate level pegging for domestic industry.
Textile 35%: Cheap Chineseimports have resulted in 35 per cent closure of power looms in Surat and Bhiwandi, the report notes.
It fires a salvo at the GST structure, stating that taxing synthetic fibres at 18 per cent, yarns at 12 per cent and fabrics at 5 per cent has caused unintended benefit to China resulting in increased imports of fabric from there. Need to look at the LDC arrangements wherein imports from LDCs are fully exempt.
Increase the customs duty on garment imports.
Modernize the power loom and handloom sector for mass production with quality.
Toys 85%: 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.
Low-priced Chinese toys are either mass-produced or are rejects from other countries and are diverted to Indian sub-continent/ Africa. Further, Chinese toys are toxic in high proportion, it says. Issue quality control order (QCO) for toys and ensure toxic and cheap quality Chinese toys do not enter the country.
Import of finished toy products from China be banned
Bicycles 58%: Bicycle imports from China saw a rise of 58 per cent in volume and 47 per cent in value in April to October 2017 over the previous year.
Further, under-invoiced bicycles constitute 85% per cent of the total bicycle imports from China in 2017-18.
Apart from affecting bicycle manufacturers, it is gradually killing the unorganized industry of small bicycle parts manufacturers who provide employment to many skilled and unskilled workers. Carry out detailed analysis of the customs data in order to unravel the modus operandi of the unscrupulous importers involved and curb the entry of under-valued Chinese bicycles into the country.
Source: Impact of Chinese Goods on Indian Industry, 145th report of Parliamentary standing committee on commerce
