Rising imports from China hit MSMEs hard: House panel

Trade between the two countries has been lopsided, with India running a deficit of $63 billion with China.

Rising imports from China have taken a heavy toll on the employment-generation potential of the manufacturing sector, especially among the micro, small and medium enterprises (MSMEs), the parliamentary standing committee on commerce said.

The major impact of Chinese imports has been felt by labour-intensive sectors like textile, steel and power. “The stainless-steel industry is a case in point, where a number of MSMEs have had to close down, particularly manufacturers of stainless steel grades of the 200 series due to Chinese imports,” the report, titled ‘Impact of Chinese goods on Indian industry,’ said.

The panel recommended that India take more stringent measures to completely protect local industries against illegitimate, protectionist and unfair trade practices used by trading partners.

However, the committee observed that imposition of anti-dumping duties against Chinese products have largely failed as these duties are relatively few compared with the amount of Chinese dumping that takes place.

“Nearly 75-80% of Chinese steel products are covered under anti-dumping duty, yet despite this, import of such steel products have increased by 8%. This clearly shows that anti-dumping measures have become completely ineffective,” the committee noted in its report.

The report suggested further measures to curb dumping of Chinese goods. It said that quality standards and technical regulations are potent tools to check sub-standard Chinese imports. “However, the Quality Control Orders and Compulsory Registration Orders laying down technical standards of the products being imported need strengthening,” the report said.

The committee said that the impact of Chinese imports was far reaching as downsizing and closing of industrial units would adversely impact the tax collection and Make in India program.

Further, the closure of industry will also stress the banking sector, which is already reeling under the burden of huge non-performing assets (NPAs), the report said.

The trade between the two countries has been lopsided, with India running a trade deficit of $63 billion with its neighbour. This accounts for 40% of India’s total trade deficit.

During the period 2007-08 to 2017-18, India’s exports to China increased by $2.5 billion; imports, however, increased by $50 billion during this period, the report said.

Making an observation on Chinese competitiveness, the report said that the Chinese industry has also been benefited by opaque government interventions to boost low-cost production.

The effect of this legitimate and illegitimate support has helped China create a huge inventory of products and dump their products globally, the report said.

China is involved in anti-dumping investigations for 214 products. In comparison, there are 86 anti-dumping cases initiated against the EU, 64 cases against South Korea, 62 cases against Taiwan and 41 cases each against Japan and the US.

“China faces the major chunk of anti-dumping investigations which is a clear indication that Chinese goods are causing unfair trade disruption,” the report said.