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By N.S.Venkataraman
(File: India, China troops clash at Himalayan border. Photo: Reuters)

India imports several essential and non essential products from China such as button, zippers, toys, furniture and several chemicals and pharma products such as ibuprofen, paracetamol , citric acid, electronic goods, solar equipment and others. India certainly has the skill and knowledge to make most of these products. In the case of other products, Indians can certainly acquire necessary skill in quick time to manufacture these products, if proactive policies would be implemented by government.

In 2019, India’s imports from China was 65. 83 billion USD and exports to China was 17.1 billion USD.

India’s import of pharmaceutical products from China increased by 28% in 2018-19 compared to the import in 2015-16.

Most of the exports from India to China are natural products, mineral ore etc. and not much of value added products.

If one would do indepth analysis of the potential skill and capabilities of Indians vis a vis that of Chinese, it can be clearly seen that there is not much of difference.

Mindset of Indian buyers:

While evaluating the prospects of Atmanirbhar Bharat scheme launched by the Prime Minister, one has to examine whether there is mindset problem in India amongst the Indian buyers , whether they are industries, individual consumers or traders .

Do they opt for profit in quick time, instead of striving to build and support domestic capacity for production with personal and national pride getting focus with determination and faith?

Several examples can be readily cited to prove such mindset of Indian buyers, where they opt for quick easily made cash profit, even at the cost of domestic industry.

The following example would suffice, indicating the mindset of Indian buyers.

India was producing Vinyl Acetate Monomer (VAM), an important chemical and building bloc for production of several derivative products with huge demand potentials, that was produced from ethanol . Two large Indian producers were involved in production and both of them stopped production of VAM, started importing VAM from China for their own consumption and for marketing in India due to low price of the Chinese products. Instead of optimizing the product pricing to ensure competitiveness with Chinese products , both the units stopped the manufacturing facilities and started importing and in the process they seem to think with glee that they make more profit by importing than by manufacturing in India!

So many similar case studies can be readily pointed out in several sectors including chemicals , pharmaceuticals, automobile, electronics, consumer products etc.

The prior need for the success of the Atmanirbhar Bharat scheme is that battle for the future has to be fought in the mindset of the Indian buyers operating in different sector, who should be convinced to prefer to buy Indian products and must extend support to domestic sector.

Harm done due to import dumping:

When massive quantity of products are readily imported . even the local manufacturers with self pride find it difficult to sustain the production operations , as the huge import at low price from China largely throw them out of the market.

In the event of unequal competition and import dumping from abroad in the case of some products , Indian manufacturers may need some breathing time to optimize the process operations in tune with the international trend, so that they can with stand the competition not only in India from imported product but also internationally.

When Indian buyers themselves do not support the Indian manufacturers by preferentially buying the local products, how can the Atmanirbhar Bharat scheme become successful?

Imported product at low price with easy credit terms:

The fact is that Indian products are of reasonable quality standards in most cases and India has enough manufacturing capacity with good manufacturing standards for several products that are now imported, even as Indian buyers prefer imported products.

The problem is import dumping from China at low price and Chinese producers providing high credit terms to the Indian buyers.

Indian buyers prefer chinese products since the prices are low, as Chinese government provide several hidden incentives to producers in China to export the products at low price..

Further, Chinese companies provide credit terms of as much as six months from the date of bill of lading , after opening Irrevocable Letter of Credit by the Indian buyers-importers. This means Indian buyers can import the products and use the products and pay only after six months.

In the process, Indian producers are unable to compete with imported Chinese products in Indian market, as they do not get support from Indian buyers.

The root problem is that the Indian buyers love profit more than national pride.

To avoid import dumping from China, the mindset of Indian buyers have to undergo change.

Need for adequate safeguard duty:

Government of India should encourage and help Indian producers by imposing safe guard duty on several chinese products presently imported in India in large quantity.

Government of India can justify such safeguard duty , as China has non market economy,, which has been confirmed by WTO in a recent judgement,

WTO ruling against China:

China spent four years fighting for market economy status in World Trade Organisation, a designation that would give it stronger footing in exporting products , while also curtailing the ability other countries to retaliate over trade disputes.However, China lost that battle in June ,2020. The case was initially brought in 2016 and China lost an interim ruling in the matter last year.

This resolution is a major setback for China, as the EU steps up efforts to limit its expansionist practices into the European continent. On the same day that China allowed the dispute to lapse., the EU announced an unprecedented attempt to block China’s subsidies to exporters. The 27 nation bloc will also unveil a proposal to protect European companies from Chinese takeovers.

The US and European Union do not consider chinese price reliable and for decades, they have calculated chinese anti-dumping duties in favour of data from third countries that adhere to free market forces. That has allowed them to add extra duties to chinese imports that help keep their domestic producers competitive.

Pressure from Indian buyers:

In the past, while imposing safeguard duty, Government of India appear to be having a lenient attitude in the case of products from China due to the pressure from Indian buyers-importers and safeguard duty is often not enough. Here is an example.

India bought 20 percent more solar modules and cells from China in 2019-20 compared with the previous year, in volume terms – showing that the 15 percent safeguard duty that was imposed on chinese products for that year was not effective. In 2018, Government of India imposed 25 percent safeguard duty on solar modules and cells (cells are assembled to make modules) imported from China and a few other countries, applicable for one year from July,30,2018 to July 29,2019. The rate of duty was reduced to 20 percent and 15 percent for next two half year periods.

The pity is that when import dumping enquiry are conducted, Chinese suppliers get support from Indian buyers on many occasions, indicating clearly that some Indian importers and buyers love profit more than national pride.

(Author N. S. Venkataraman is a trustee with the "Nandini Voice for the Deprived," a not-for-profit organization that aims to highlight the problems of downtrodden and deprived people and support their cause. To promote probity and ethical values in private and public life and to deliberate on socio-economic issues in a dispassionate and objective manner.)

Published Date: Wednesday, July 8th, 2020 | 09:10 PM

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