India unable to compete with Chinese imports when it comes to exports

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For one, imports from China accounted for over 16 percent of India’s total import basket in 2015-16, as per data available on the website of the Department of Commerce. Not only is China a country from where India imported the highest value of goods last fiscal, the amount we spent on buying the same Chinese goods which the ultra nationalists now want us to eschew was more than the combined amount India spent on importing stuff from United States, UAE and Saudi Arabia last fiscal.

India imported goods worth $61.7 billion from China last fiscal when India sent goods to that country merely worth $9.05 billion. India’s imports to China have almost halved over the last four years. A back-of-the envelope calculation shows we imported at least six times more from our largest trading partner than China did from us. Isn’t it then obvious that India is rather heavily dependent on Chinese imports and any weakening of trade ties between the two countries will substantially hurt Indian businesses, not so much China?

But why is India unable to compete with China when it comes to exports? According to a written answer Commerce Minister Nirmala Sitharaman gave in Lok Sabha during the Mosoon Session earlier this year, trade deficit with China has been increasing as Chinese exports to India rely strongly on manufactured items to meet the demand of fast expanding sectors like telecom and power. India’s exports to China, on the other hand, are characterised by primary and intermediate products.

The upshot of this is that we send products to China which are not high value-added, whereas China is sending products such as telecom instruments, computer hardware, peripherals, fertilizers, electronic components/ instruments, project goods, organic chemicals and drug intermediates, consumer electronics, electrical machinery and equipment, iron and steel etc.

“These imports feed the growing demand in India for such goods which China, due to variety of reasons, is able to export to India at competitive prices,” Sitharaman said in her reply. India’s trade deficit with China increased from $38.67 billion in 2012-13 to $48.45 billion in 2014-15.

The misguided approach towards the Sino-Indian trade ties on social media is also bothering many traders and wholesalers in and around Delhi. With Dilwai around the corner, an overwhelming chunk of goods – lights, some crackers, furnishings, gift items – all come in large quantities from China. If the Chinese stuff is not sold, traders fear a dark Diwali. Stocks have mostly been replenished months back in anticipation of the usual Diwali buying frenzy, and they came in when India and China were still not at loggerheads over Pakistan.

The president of a well-known traders’ association in Delhi did not want to be identified but told Firstpost that this year, business is suffering due to overall gloom in the market, the reduced sales have little to do with the so-called anti-China sentiment. “By this time last year, we had sold off 70-80 percent goods before Diwali but this time only about 25 percent has been offloaded. I don’t think Chinese goods are the specific reason for this decline in sales and anyway we expected the sentiment to improve closer to Diwali. I don’t see much impact of anti-Chinese sentiment”.

Manish Jain, owner of one of the large gift items’ shops in Delhi’s biggest wholesale market, Sadar Bazar, said supply of imported goods from China has anyway been negligible for the last three months so there was no reason to assess the so-called anti-China sentiment.

“No shipments have been coming from ports for the last three months…I do not know why. Sales are anyway suffering, we are selling whatever is there in stock (Indian and Chinese goods). Impact of anti-Chinese sentiment will be known only after the season is over”.

This report quotes IndiaSpend’s visit to Manish market, the hub of imported Chinese goods in Mumbai’s heart. It says Chinese products here are cheaper, available in bulk, neatly packaged and easy to buy. “If the 50 different types of LED lamps that I sell were available from say, Surat, at a cheaper rate and at my doorstep, why would I go for Chinese lamps?” asked a lamp distributor and retailer, requesting anonymity. “If I had to buy these in India, this collection would cost me double.”

But Kunal of Ram Chand Chhunnu Lall Fireworks near Delhi’s Jama Masjid and Manish Sachdeva of Sachdeva Lighting, both denied any Chinese connection vehemently. Kunal averred that none of the 7-8 shops selling crackers near Jama Masjid stock any Chinese stuff while Sachdeva said there was no need for Chinese goods in premium lighting, this was mainly the need for ocassion lighting with ‘ladis’.

Some associations like the Confederation of Indian Traders (CAIT), however, seem to place ultra nationalist sentiment over plain business sense. Praveen Khandelwal of CAIT said there has been a 30 percent decline in shipments from wholesalers to retailers after the anti-China sentiment surfaced on social media and that he has “personally” seen consumers avoiding Chinese products in the run-up to Diwali shopping.

But in the same breath, he said it was impossible to totally ban imports from China due to global trade compulsions. “China has celebrated its Diwali since import shipments usually arrive three months in advance, when the entire Masood Azhar issue had not happened. They will suffer during Christmas and New Year now,” Khandelwal said.

Instead of targeting sale of small-value Diwali items imported from China, India should be looking to demand greater market access for some of its exports to China. Of course, we also need to take some major initiatives to correct the widening trade imbalance between the two countries and try and lessen our import dependence. But until this is achieved, India is really in no position to avoid using Chinese goods which have flooded our local markets.

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