The government may resume elaborate physical inspections of Chinese imports because it suspects large-scale dumping of finished Chinese products in the garb of raw materials and intermediates, people familiar with the matter said.
Chinese imports surged by 34% to over $78.5 billion in first eight months of 2022 even as India’s exports to China plunged 37% to $12.6 billion, the people added.
There is a need to restart detailed physical examination of consignments emerging from China or third countries, the people said requesting anonymity. It was in mid-2020 that India stopped such examination, giving in to demands from Indian companies and traders who complained of delays arising from the customs department inspecting every Chinese shipment. To be sure, given the sharp recovery in India’s economy, and a revival of manufacturing activity, it is only natural that Chinese imports of raw materials and intermediaries have increased — although the magnitude of increase has alarmed the government.
In addition, the government fears that Chinese imports are coming into India from other countries.
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“It is also suspected that Chinese goods are being re-routed to India from third countries with which New Delhi has free-trade agreements (FTAs). There is information about Chinese goods getting concessional duty access to the Indian market without any value-addition in the third country. It is happening in collusion with some unscrupulous local businessmen. The matter is being probed,” one of the people, a government official, said.
The people mentioned above said influx of garments, plastic products, suitcases, handbags, furniture, household items, electronic goods, mechanical and electrical products are major concerns also because it negates India’s Aatmnirbharat Bharat Abhiyaan (Self-reliant India initiative).
The ministries of commerce, finance, the Directorate General of Foreign Trade (DGFT) and the Central Board of Indirect Taxes and Customs (CBIC) did not respond to an email query on this matter.
According to the latest data released by Beijing, India-China bilateral trade in the first eight months of current calendar year has already crossed $91.19 billion, a 16% year-on-year jump with trade heavily tilted in favour of Beijing. While China is exporting goods worth $78.57 billion to India during this period (about 34% y-o-y growth), its import from India fell sharply by 37% to $12.62 billion.
Indian official data available up to the first seven month of 2022 corroborate the trend. India’s imports from China through official channels surged to $61.29 billion in January-July 2022, a 29% jump compared to $47.52 billion in the same period previous year. With the latest preliminary data for exports to China up to August, India’s exports to China plunged sharply by 35.6% at $6.8 billion in January-August 2022 period compared to $10.5 billion in the same period previous year.
One reason for this is dumping, a second person alleged.
“ Chinese dumping has changed the trend from last year — from low-value goods to high-value products; hence significant impact in the dollar terms. If this trend continues, this year we may cross $100 billion Chinese imports,” this person added. According to official data of India’s commerce ministry, India-China bilateral trade jumped to $110.7 billion in 2021 (calendar year) with Chinese imports surging 49.3% (yoy) at around $87.65 billion.
Pradeep Multani, President of PHD Chamber of Commerce and Industry (PHDCCI), said: “Imports from China have changed from low-value, low-cost products like toys and crackers to high-value items like electronics. Unfair competition from imports from China had a severe impact on the growth prospects of domestic manufacturers, especially small businesses.”
“Further, a check on dumping of finished Chinese goods in India is strictly required. Efforts should be made to make country of origin rules tougher, so that Chinese origin products cannot enter via other countries,” he said.
Arpita Mukherjee, professor at Indian Council for Research on International Economic Relations (ICRIER), a think-tank, said: “There are two issues here. First, if there is dumping we need to check the products, their tariffs and then seek trade remedial measures as per the WTO norms. Second, there seems to be some issues in the Customs risk management system and we need a technology driven robust risk management system with limited scope for manual interventions. Both of these need to be addressed.”
The issue is compounded by the fact that India’s inspection infrastructure is inadequate.
“While many developed countries can scan containers in seconds, India lacks such scanners and the Customs Department must have such equipment if it is serious about rules of origin, dumping of Chinese goods and ease of doing business,” a third person said.
India’s small and medium enterprises are worst affected by the influx of Chinese products, said Technocraft Industries chairman Sharad Kumar Saraf, who has manufacturing facilities in both India and China . “It is true that there are some imports of Chinese finished goods, mainly products like garments… But, we are hugely dependent on China for inputs, which is against our Aatmnirbhar Bharat policy, In fact, we are still China-Nirbhar for our manufacturing.”
Saraf said he has suggested the government to identify 10 items imported from China and focus on them through production-linked incentive (PLI) scheme and after six months again identify 10 such items. “It is easy to say stop imports from China, but this would be self-defeating unless we are self-sufficient in raw materials and intermediates.”
“Despite the prolonged border stand-off, India’s trade deficit vis-a-vis China is set to almost touch $100 billion for the first time,” cautioned Arun Singhal, founder & CEO of Source.One, a logistics service provider engaged in procurement of raw materials for micro, small and medium enterprises (MSMEs).
Multani said China has been resorting to unfair trade practices, dumping low cost products, and rerouting such products via various other countries. “As a result, unfair competition from low cost imported products has impacted the sentiments of domestic manufacturers especially MSMEs in terms of expansion of production processes and employment creation,” he said. Established in 1905, PHDCCI has 1,30,000 firms as its members, mostly small and medium businesses.
He said the government’s PLI and PM Gatishakti schemes aim to boost Indian manufacturing, but more efforts are needed. He cited a PHDCCI’s report — Prospects and Potential for Enhancing Exports and Reducing Imports of India — that highlights the country’s potential to reduce 40% imports (around $35 billion) from China. “India has significant scope for producing more import substitution in the sectors including chemicals, automotive components, bicycle parts, agro-based items, handicrafts, drug formulations, cosmetics, consumer electronics, and leather-based goods among others,” he said.