Impact of Chinese Goods on Indian Economy

A FINAL PROJECT REPORT ON

“IMPACT OF CHINESE GOODS ON INDIAN ECONOMY” For The Partial Fulfillment of Degree of Bachelors of Business Administration Batch 2010-2013

UNDER THE GUIDANCE OF DR. AJAY SHARMA Faculty of management Graphic Era University, Dehradun

Submitted by: RAJAT MITTAL BBA VIth SEMESTER (MARKETING)

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ACKNOWLEDGEMENT

This project is a bonafide record of the research work done by me in the partial fulfillment

of

the

curriculum

of

BACHELOR

OF

BUSINESS

ADMINISTRATION. I would like to convey my special thanks to Dr. Ajay Sharma (Faculty of management GEU) for giving me an opportunity to undergo this project.

Above all I would like to thank God as the project would not have been completed without the shadow of his dignity.

RAJAT MITTAL VIth SEM (Marketing) BBA

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TABLE OF CONTENTS Chapter 1 - Introduction

4-8

Chapter 2 - Impact of Chinese Goods on Indian Economy

9-10

Chapter 3 - India vs. China Economy

11-15

Chapter 4 – Research Methodology

16

Chapter 5 - China Shadow On Indian Economy

17-32

Chapter 6 - Chinese Goods Choking the Indian Market

33-35

Chapter 7 - China Goods in India

36-40

Chapter 8 - Findings

41-43

Conclusion

44-45

Bibliography

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CHAPTER -1 INTRODUCTION MADE IN CHINA, SOLD IN INDIA:With the world turning into a global village and competition getting stiff, countries like China are ruling the roost in many a market in varied spheres. India is the hub of diverse business opportunities, and slowly yet steadily, Chinese products like electronics, crackers, idols, apparels, etc. are predominating similar Indian products. The festive season is the season of business especially filling the pockets of traders. But instead of the domestic sector holding sway over the market, the opportunities are grabbed by Chinese manufacturers with their variety of exquisite products. Whether it is SMEs ( Small and Medium Enterprises) or cottage industries, they are not able to provide a stiff competition to the cost effective offers provided by the Chinese. Due to these relentless import of Chinese products, most Indian cottage industries have closed down, and the future of the existing ones looks very bleak. The Chinese entrepreneurs have infiltrated the market in a very systematic manner with their well-planned marketing strategies and continuous innovations. They GRAPHIC ERA UNIVERSITY

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study the demand patterns and the market trends and work out the lowest price that they can offer to attract a huge section of the consumers while still maintaining a profitable margin. As the Indian market is price-oriented, the domestic players are slowly losing their share to the strategic Chinese entrepreneurs. Chinese electronic goods like radio, torch, DVD players, etc. are reigning supreme in the Indian market. Decorative items, fashion accessories like slippers, jewelries, hand bags, etc. receive huge responses during festive seasons. This year, one saw the flooding of the Indian markets with Chinese made idols which were welcomed with open arms by the Indian consumers. Commenting on the change of the market scenario, Mr. S.P Agarwal, President of Delhi Exporters Association, said, "Chinese manufacturers have created a big problem for the Indian manufacturers. Especially the cottage sector which produces goods like handicrafts, decorative items, gift articles, idols etc. has been drastically affected, by the dominance of Chinese products in the market. This has raised a question mark against the various marketing policies that the Indian Government is making." Even the entry of these products is questionable. According to Mr. Bikky Khosla, "The need of the hour is to address whether the products are fully duty paid or

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illegally imported to India. In the long run, with globalization and free trade becoming the norm of trade, Indian SMEs need to buckle up and get ready to face these challenges. No doubt SMEs have been affected, yet they need to be educated on latest market trends and technologies. SMEs should be encouraged and guided for the marketing of their products." Adding to this, S.P.Agarwal said, "Indian SMEs should learn from China about various marketing strategies undertaken by them. Rather than comparing the two countries, the Government should first focus on its policies and work on the ways to ensure that these products from China are heavily taxed so that the Indian craftsmen's only livelihood don't get affected due to the unrestricted import of Chinese made products." The only way the above problem can be solved up to an extent is by introducing SME favorable policies. The Indian Government should understand the basic fact that SMEs are the backbone of Indian economy and their growth will in turn add to the development of India. Indian SMEs should also continuously study the market needs and come up with innovative and cost effective products to tackle the burning issue.

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ECONOMY OF INDIA The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF. India is the 19th-largest exporter and the 10th-largest importer in the world. Economic growth rate slowed to around 5.0% for the 2012–13 fiscal years compared with 6.2% in the previous fiscal. It is to be noted that India's GDP grew by an astounding 9.3% in 2010–11. Thus, the growth rate has nearly halved in just three years. The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation. In 1991, India adopted liberal and free-market principles and liberalized its economy to international trade under the guidance of Manmohan Singh, finance minister from 30 November 2009 to 24 January 2010, and previously under the leadership of P.V. Narasimha Rao, prime minister from 1991 to 1996, who had eliminated License Raj, a pre- and post-British era mechanism of strict government controls on setting up new industry. Following these major economic reforms, and a strong focus on developing national infrastructure such as the Golden Quadrilateral project by Atal Bihari Vajpayee, prime minister, the country's economic growth progressed at a rapid pace, with relatively large increases in per-capita incomes. GRAPHIC ERA UNIVERSITY

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OVERVIEW The combination of protectionist, import-substitution and Fabian social democratic-inspired policies governed India for sometime after the end of British occupation. The economy was then characterized by extensive regulation, protectionism, public ownership of large monopolies, pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the country towards a market-based economy. By 2008, India had established itself as one of the world's fastest growing economies. Growth significantly slowed to 6.8% in 2008–09, but subsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. India's current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2010–11, according to the state Labour Bureau, was 9.8% nationwide. As of 2011, India's public debt stood at 68.05% of GDP which is highest among the emerging economies. However, inflation remains stubbornly high with 7.55% in August 2012, the highest amotrade (counting exports and imports) stands at $606.7 billion and is currently the 9th largest in the world. During 2011–12, India's foreign trade grew by an impressive 30.6% to reach $792.3 billion (Exports-38.33% & Imports-61.67%).

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CHAPTER - 2 CHINESE GOODS IN INDIAN ECONOMY Chinese goods on Indian economy. There seems to be no way to escape the DRAGON!!! Chinese goods are using the big Indian market merely to dump their products and by doing so they are killing the Indian units. For example last year during Diwali, China made crackers were sold in the Indian market. These crackers reportedly contained Sulphur. Sulphur is more harmful than Nitrate, which is used in India to make crackers? Since the Chinese crackers were cheaper than the Indian crackers, so they managed to attract innocent and largely illiterate Indian lot. As a result the Indian cracker industry saw a decline in the revenue. Because of cheaper prices products made in China are becoming more popular among the Indian masses. This has had a very negative effect on our own manufacturing units and as a result many of them have had to shut shop. For instance, data reveals that 60 per cent of the industrial units in the industrial belts of Thane and Bhivandi near Mumbai have been closed down. (Indian cottage industries i.e. handicraft) Due to its cheap labour, China offers low– priced imports such as textiles and clothing, electronic devices, machinery, etc. According to official data, Chinese imports stood at $3I9 million (Rs 1,435 crore) during April-June this year as compared to $223 million (Rs 1000) crore during GRAPHIC ERA UNIVERSITY

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the corresponding period of the previous year. It has also affected Indian Export market, as china has replaced Indian goods in the foreign market as being cheaply produced. DRAGON’s designs of capturing a major share …: DRAGON‟s designs of capturing a major share … They are killing the economy of not only India but also the economy of the whole world very slowly. They are selling their cheap products on very cheap rates and we people are getting addicted of these cheap rated things and after few years there will come a time when you will see only the Chinese goods in the markets because all the other manufacturers will become bankrupt and after that China will start to raise the rates of their products i.e. there will be complete monopoly of china on the goods market. That‟s the policy on which china is working now days. .

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CHAPTER-3 INDIA VS. CHINA ECONOMY INDIA VS CHINA ECONOMY Making an depth study and analysis of India vs. china economy seems to be a very hard task. both India & china rank among the front runners of global economy & are among the world‟s most diverse nation. . Both the countries were among the most ancient civilizations and their economies are influenced by a number of social, political, economic and other factors. However, if we try to properly understand the various economic and market trends and features of the two countries, we can make a comparison between India and Chinese economy. Going by the basic facts the economy of china is more developed than that of India. while India is the 11th largest economy in terms of the exchange rates. china occupies the 2nd position surpassing Japan. Compared to the estimated $1.3123 trillion GDP of India. China has an average GDP of around $4909.28 billion in case of per capital GDP. India lags far behind china with just $1124 compared to $7.518 of the latter. To make a basic comparison of India and china economy. we need to have an idea of the economic facts of the countries.

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Facts

India

China

GDP

around $1.3123 trillion

around 4909.28 billion

GDP growth

8.90%

9.60%

Per capital GDP

$1124

$7,518

Inflation

7.48 %

5.1%

Labor Force

467 million

813.5 million

Unemployment

9.4 %

4.20 %

Fiscal Deficit

5.5%

21.5%

Foreign Direct Investment

$12.40

$9.7 billion

Gold Reserves

15%

11%

Foreign Exchange Reserves

$2.41 billion

$2.65 trillion

World Prosperity Index

88Th Position

58th Position

Mobile Users

842 million

687.71 million

Internet Users

123.16 million

81 million.

If we make the analysis of India vs. china economy. we can see that there are a number of factors that has made china a better economy than India. First things first, India was under the colonical rule of the British for around 190 years. This drained the countries resources to a great extent and led to huge economic loss. On the other hand, she was no such instance of colonization in china. As such, from the very beginning the country enjoyed a planned economic model which made stronger.

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AGRICULTURE Agriculture is another factor of economic comparison of India and china. It forms a major economic sector in both the countries. However, the agriculture sector of china is more developed than that of India. Unlike India, where farmers stills use the traditional and old methods of cultivation. The agriculture techniques used in china are very much developed. This leads to better quality and high yield of crops which can be exported.

IT/BPO One of the sectors where India enjoys an upper hand over china is the IT/BPO industry. India‟s earning from the BPO sector alone in 2010 is $49.7 billion while china earned $35.76 billion.

LIBERALIZATION OF THE MARKET In spite of being a socialist country, china started towards the liberalization of its market economy much before India. This strengthened the economy to a great extent. On the other hand, India was a little slow in embracing globalization and open market economies. CHINA’S IMPORT & EXPORT (2010/11) As far as exports of both the countries are concerned both the country managed to do pretty well in 2012. China total imports and exports stood at US $2677.28 billion at the end of nov.2010. India‟s exports grew by 26.8% and imports increased by 11.2%. below is presented details about china‟s import and exports for the year 2010.

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CHINA’S IMPORTS & EXPORTS (2010/11) Absolute Value for November

Year-on-year growth % for November

Absolute Value Year-on-year for first 11 growth % for months first 11 months

Export Value

1533.3

34.9

14238.4

33.0

Import Value

1304.4

37.7

12534.3

40.3

Total Import and Export Value

2837.6

36.2

26772.8

36.3

Import and Export Balance

228.9

20.7

1704.1

-3.9

Impact of Imports from China on the Indian Economy in General and Employment in Particular in Share Even as the impacts of globalization continue to be debated, it is generally conceded that such impacts are uneven across the economies of nation-states and also within particular countries. Some sectors gain more than others, while others decline China has become India‟s leading trading partner. Two-way trade between the two most populous countries on the planet and the fastest growing large economies is expected to reach around USD 60 billion by the end of fiscal year that ends on March 31, 2011. During a recent visit to India, China‟s President Wen Jiabao and India‟s Prime Minister Manmohan Singh agreed to double bilateral trade to USD 100 billion by 20151. The trade deficit has been widening consistently and has reached USD 20 bn in China‟s favor causing concern among GRAPHIC ERA UNIVERSITY

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Indians. India accounts for just above one per cent of China‟s total exports but exports from India to China are a relatively negligible proportion of total imports by China. Casual anecdotal evidence points towards a fairly significant level of penetration of Chinese goods into virtually every nook and corner of markets in India -- from small gas lighters to advanced computers, the “Made in China” product is very visible across the length and breadth of the country. China is considered the manufacturing hub of the world. There are allegations that Chinese firms have unfair advantages over their counterparts in other parts of the world (including India) in terms of tax breaks and a devalued currency. Chinese exporters have been accused of dumping. As a matter of fact, India has initiated the highest number of anti-dumping cases against China. It has, therefore, become important to study and understand how the rapid increase of Chinese imports to India has impacted markets here. On the one hand, cheap imports from China could force Indian manufactures to become more productive and competitive. On the other hand, unfair and predatory trade practices by Chinese companies could prove harmful not only to Indian industry but to the country‟s economy as a whole by constraining domestic job opportunities or even, destroying livelihoods. Whereas cheap products attract consumers, concerns about quality and safety.

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CHAPTER-4 RESEARCH METHODOLOGY 4.1 Problem Statement: As the world looks more and more unpredictable, India should cut interest rates and figure out a way to compete with China, which is inundating Indian markets with cheap goods.

4.2 Research Objectives: 1. To study impact of Chinese goods on Indian economy

4.3 Research Design: The present investigation is descriptive type of study undertaken to estimate the scenario.

4.4 Methods of Data Collection Only secondary data was used to conduct the study. The data was collected from the official websites of SEBI and RBI. The final data were analyzed systematically to achieve the desired reserve from magazines, journals, various websites etc.

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CHAPTER - 5 CHINA SHADOW ON INDIAN ECONOMY China shadow on Indian economy

Rather than use tariff barriers to redress its trade imbalance, India should add to the pressure on China to revalue its currency. Chinese Economic Collapse - Corruption, Manipulation, Bad Loans Is The China Bubble About To Burst? A weak yuan has contributed to a surge of Chinese imports into vulnerable sectors such as raw silk. At another level, China is increasing its presence in strategic sectors, including power. India has failed to come to grips with this situation.

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economy reflect the dangerous turn that economic relations between the two countries have now taken. The concerns over the balance of trade shifting sharply in favour of China have acquired a strategic edge, with state-influenced Chinese companies gaining a significant share of critical sectors of the Indian economy. The knee-jerk reaction to this turn of events would be to raise tariff and non-tariff barriers at random. But, apart from generating retaliatory measures on the Chinese side, this would also hurt the beneficial dimensions of trade between two of the world's fastestgrowing major economies. It would be more meaningful to explore the nature of the unfair advantage the Chinese have and work to create a more even trading field. At the heart of the Chinese success is their ability, and willingness, to take the instruments of state control into the battleground of the free market. Their trade with the United States has been spurred by keeping the yuan consistently weak against the dollar. This makes Chinese products cheaper and has allowed China to gain a major share of the American market. China's rising exports to the US should normally have led to an increase in the demand for the yuan and, hence, a strengthening of that currency. But China has avoided that outcome by buying dollar bonds and simultaneously not allowing the yuan to respond to market trends. To the extent that India tries to maintain some kind of stability in the rupee-dollar GRAPHIC ERA UNIVERSITY

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exchange rate, the Chinese advantage against the dollar is transferred to the rupee as well. And if this advantage is countered by the rupee weakening against the dollar, as it has in recent weeks, it simultaneously raises the cost of our essential imports. This has an inflationary impact at home as it pushes up the price of oil and food imports. There is thus an Indian interest in keeping the rupee stable against the dollar, even if it offers an advantage to Chinese imports into India.

STRATEGIC INVESTMENTS The Chinese have built on this exchange-rate induced advantage for their products in Indian markets through strategic investments in key sectors of the Indian economy. By keeping their currency weak they are no doubt increasing the cost of their investment in Indian companies. But the Chinese evidently believe this investment is still worth their while because of the strategic importance of the sectors their state-influenced, if not controlled, companies are investing in. They are now believed to have a significant stake in India's power sector and are making rapid inroads into the telecom sector as well. Even as the Chinese are breaking out of old ideological moulds to use their state power in a relatively free global market, India is helping their cause by making it easier for them to target vulnerable sectors of the Indian economy. A striking example of this trend is the Union government's approach to Indian sericulture. GRAPHIC ERA UNIVERSITY

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Karnataka emerged as India's largest raw silk producing State, largely on the basis of a concerted effort in the 1970s to develop sericulture as a secondary occupation for agriculturists. The success of this initiative provided a safety net for agriculturists in the decades when the Green Revolution began to falter. For several years now this sericulture segment has faced the challenge of the Chinese dumping raw silk into the Indian market. Aided by a favorable exchange rate as well as possible state support, China has been grabbing a larger share of the Indian raw silk market. And the Indian government has, in its commitment to liberalization, aided this process by reducing the duties on raw silk. Thus, the Chinese have developed an ability to hurt vulnerable sections of the Indian economy. It may be paranoid to see this as being part of a Maoist conspiracy, but its destabilizing potential cannot be ignored.

TARIFF BARRIERS The seriousness of the current situation may demand the immediate erection of tariff and other barriers, but there is little to be gained in the longer term by building barriers between the two major economies that are outside the direct impact of the economic crisis that has engulfed the Western world. Rather than blocking all trade, the way forward would be to target the instruments that China has used to gain this hold on the Indian economy. Prominent among the longer-term steps India could take is to join the international GRAPHIC ERA UNIVERSITY

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pressure that is being built up on China to make its currency reflect market realities, at least to a greater extent than is the case today. India would also have to consider increasing state investment, not to subsidize specific industries, but to at least offset some of the advantages that Chinese products are provided by their state. Special care must also be taken to ensure that state- supported Chinese goods are not dumped in a way that destroys the most vulnerable sections of the Indian economy. As India gears up to meeting the economic and strategic threat that China now poses, it is important to remember that the most rewarding way forward lies in fair trade rather than no trade.

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Invasion of Chinese goods in India- the Whys and How’s Come any occasion and the Indian consumer is ready to make a beeline to purchase another of those Chinese goods. For one, these Chinese goods are substantially cheaper than Indian goods and come in wide varieties. In very simple terms in Economics, we know that anything like large scale dumping and imports can spell a disaster for the economy. In simple Keynesian terms, it is a leakage of Income from the Economy. This article focuses on the background of the Pricing Policy by China, the damage or not it can cause for the Indian domestic industry, the anti dumping tariffs adopted by the Indian government, the latest Statistics and we conclude with some Policy suggestions. As the memory of an Indian consumer goes, this influx of cheap Chinese goods started in the late 90s and gained momentum thereon. Every article, be it an expensive Barbie doll or a painting you want to adorn your house with has a Chinese alternate to it. Why the Chinese goods are priced so cheap? The cost of production being less in China is an obvious answer but when we dwell deeper into the world of Chinese manufacturing, the reasons abound. Chinese goods are known for their moderate quality, prompt delivery and affordable prices in comparison to Indian goods.

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Following are some of the reasons behind Chinese goods being cheaper than Indian goods 1) China does not have stringent intellectual property rights (IPR) issues so come any new product in the world market; China is ready with a cheaper alternate. Thus there is no cost of research, designing and redesigning of any product. 2) The labor is not demanding and does not go on strike. 3) Where most Indian companies are striving for a Total Process Review (TPR) for quality satisfaction, Chinese companies are not so particular. 4) China does not have any after sales tax on its products leading to a further lowering of costs. 5) Are we enjoying the cheap Chinese goods because the Chinese currency Is undervalued leading to purchase of cheap Chinese goods? This needs to Be carefully studied. 6) The cheap Chinese labor is another major reason for the dirt cheap Chinese goods especially like toys where intensive labor techniques are Employed. 7) With the removal of quantitative restrictions (QR), the ending of the textile quota regime and Chinese accession to WTO, the dumping activity by Chinese has increased manifold. 8) Lower rate of Indirect taxes on Inputs. High level of cash subsidies being offered by the Chinese government to its producers and exporters.

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9) Lower taxes enable the Chinese companies to participate in the world market at a lower margin and thus dominate it. Adopt the business model focused on higher volumes is a natural progression in this scenario.

We must also mention here the advantages of the high economies of scale and higher level of Productivity achieved by highly skilled labor. We must remember here that China could not have been able to do it alone. The import of technology and Infrastructure from West has played a very important role. Had West not opened its gate to the Chinese products, China could not have boasted of such huge trade surplus. China Imports very little from the rest of the world. It is noteworthy to mention the reverse Chinese model of manufacturing. China produces in bulk and sells in bulk. Rather than waiting for the orders and then producing, Chinese have mastered the art of producing first and selling it later. This is possible due to low interest rates and low taxes Chinese government imposes. This model helps the buyers as they do not have to wait for the produce. They can inspect, pay and ship the delivery in a single day! Since Chinese accession to WTO, China has been much more liberalized in reducing Tariff and Non Tariff barriers. The Liberalization measures taken by China have been more broad and deep in nature though it entered WTO in 1991 whereas India has been a member since Inception.

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Dumping Meaning and Effects- The simple meaning of dumping is to sell your country‟s products in other countries at unfair lower rates than the domestic rates prevailing in the country of Export leading to losses to domestic suppliers. China has indulged in large scale dumping all across the world; India being majorly affected. Here it has to be remembered that everything you complain against will not be qualified as dumping. According to WTO, if Investigations prove for such goods falling in the anti dumping bracket that the exporter is charging a price below than what he charges in his domestic market or if the volume of imports is too high so as to cause a disadvantage to the local producers can be called as dumping. Thus, we conclude that not any and everything will be classified as dumping. Once a complaint is filed, it has to be investigated by a designated agencies taking into account the WTO laws. Dumping wars have gained strong ground especially in the times of recession, with India filing maximum number of anti dumping cases against China. A growing insecurity for India in resorting to levy of high anti dumping duty is the current high trade deficit with China. Can we forget to mention here the case of green? veneer tape, where the Interest of the local monopolist was protected at the cost of consumers getting a better product at more competitive prices? Besides dumping is not the only way Chinese goods enter India, much of it enters through Illegal route of Nepal. China leads in the number of anti dumping cases filed against any country in the WTO. Between 1995 and 2005, India filed more anti dumping complaints against China than any of the developed nations of US and Europe. Anti dumping GRAPHIC ERA UNIVERSITY

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measures have become more popular today to offset unfair competition, in relation to other measures such as QR‟s and import quotas which are non discriminatory in nature and require injury in severest form. To India, the pinch is more in those areas where it is also a large producer such as chemicals, toys, electronics, leather and textiles. Recently anti dumping Import duties have been filled on acrylic fibers, Analgin, potassium permanganate, paracetamol, sodium nitrite, caustic soda and green veneer tape. From 1995-1999, India initiated 140 anti dumping investigations which are highest for any country. Many feel this is not fair. It is also seen that the amount of anti dumping duties levied are against the basic rules. This also arises due to the non market economy (NME) status of China in countries such as US. As we examine, we find out that the entire amount of duty which is levied against the Chinese goods is flawed. Here it is pertinent to understand the meaning of a Non Market Economy. In very simple terms, a Non Market Economy is one which does not operate on market principles of cost and pricing. For NME‟s, the value of its goods do not reflect the true price. In most cases in US, it is seen that where the Chinese companies fail to respond against the AD case, (Many a times due to Ignorance of the legal structure) it gets more of an unfair deal. China‟s relation with US- It has already been mentioned that the boom in China is “made in USA”. Another question which is being asked commonplace today is “Are Economies such as US and Europe overly dependent on cheap Chinese? products?” The answer is „no‟ as Stephen Dunaway rightly points out, that due to intense competition, the cost differentials between China and other counties has GRAPHIC ERA UNIVERSITY

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indeed narrowed down. Another point which needs mentioning is that China‟s Economy is highly export dependent on countries such as US, so we may as well study the dependence the other way. China is facing strong opposition of dumping from the European countries as well. These Countries are levying a high import duty on vast scales Chinese dumping of leather goods. To salvage their own domestic Industries countries like Japan are resorting to high level investment in China to sell back in their own domestic economies. This will soon be followed suit by many other Economies. FDI is playing a big role in China‟s technological process with China becoming an attractive destination. India and China are considered at par in terms of investments. India with its paranoid behavior is lacking in many respects to provide a suitable ground to MNC‟s to invest in the country thus losing big on FDI. Current Strategy – The Protectionist path: What stand has India taken on Chinese? Dumping? India‟s strategy revolves around Imposing high tariffs and taxes on Chinese goods whereas countries like Japan have resorted to a high level investment in China to counterfeit Chinese dumping. How does this work? Does it affect level of FDI in our country? With the dumping allegations against China Increasing; what holds good for India now? Is putting high level of tariffs the only solution? One, a high level of tariffs does promote a menace called smuggling and offers no solution. Indian consumers end up paying more for products they could have brought cheap. Doesn‟t the simple theory of comparative advantage tell us?

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those two countries should produce and exchange products with each other in which they have a comparative advantage in? Also trade between two countries should be a multiple of their GDP‟s. Antidumping tariffs are not a solution, for one as suggested by many an economists, the line between protecting the producers and consumer welfare is very thin. Anti dumping games only prevent the competition rather than the competitors. In some cases where the product is being used as a raw material and an antidumping duty is levied on it, the end user industries suffer because of the cost of rise in their raw materials. They come at the mercy of the monopolist, duopolistic or the cartelized arrangements in their own country; thus the entire arguments of levying the anti-dumping duty becomes a façade. This is clearly illustrated in the case of imposing a safeguard duty on soda ash. It was vehemently opposed by the detergent and glass manufacturers. Their arguments being that imports of soda ash are less than 10% of the total domestic production and it doesn‟t qualify for dumping. These imports just help in keeping a reality check on the prices. The Government recently imposed a 6 month ban on the import of Chinese toys to India and withdrew it within two months after Beijing warned of going to WTO. The Domestic industry is now alleging China of becoming a price predator (Price Predation refers to selling at lower prices to acquire market share and increasing prices in future) this time. Is it a case of artificial pricing or high? intensity of competition amongst Chinese products which make similar products cost upto70% less is to be seen. Another Important fact to be mentioned here is that anti dumping Investigations takes long time for final settlement which can GRAPHIC ERA UNIVERSITY

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easily damage the domestic Industries. This has to become faster paced especially in authentic cases wherein the domestic producers are affected. Where does the solution lie? Are not increasing the Tariffs an easy solution for India or does it needs to work on its own domestic problems? How competitive is Indian manufacturing? Why are we not able to offer price parity with the Chinese? India has a rather dismal rate of competitiveness. The World Bank gives India a low rank of 40 out of 46 countries in terms of its manufacturing prowess. What is it that is holding the manufacturing sector? These are but a few questions we may ask in context of the given study. It is very clear that there is a tradeoff between the benefits to the consumers and the producers and a balance has to be maintained for the sanctity of justice in trade is to prevail but easier said than done, the solution isn‟t that simple. It is time the Government of India examines its own policies. All fallacies do not lie with the manufacturing sector. 1. Indian manufacturers do not get adequate Infrastructure. 2. They have to pay high level of taxes. 3. To remain in the reserved sector to get certain privileges by the Government they have to remain small and can‟t then enjoy the “Economies of scale” as enjoyed by their Chinese brethren.

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Time has come to develop and enhance inter industry trade with China; knowing that Chinese exports have substantial complementariness with Indian imports. FDI in India till now has not entered the way it has entered China; owing to Chinese tax breaks, business tax exemptions given to foreign firms which has not happened in India. These are few of the factors which raises the cost of production for Indian goods making it difficult to compete on price basis with Chinese. Imposition of anti-dumping and safeguard duties are not solutions; Time has come to raise the efficiency and Competitiveness of our own Industries. Unfair Methodology adopted by US, India and other Countries - We discuss some unfair practices adopted by countries in the anti dumping war against china. 1. The anti-dumping margins are grossly overstated. 2. The domestic producers use them as their weapon to get advantages to the hilt. 3. The zeroing methodology is widely criticized.( Zeroing methodology means that when the Indian price is higher instead of assigning a negative value to this, it attaches a zero, thus eliminating the negative trade margin) This is against the basic rules of WTO 4. The going of the collected anti dumping duty to the domestic producer in the US doubly hurt the Chinese companies. They have to pay penance in the form of anti dumping duty and their revenue is dispersed to their domestic competitors.

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Market Economy status for China and Impact on India- With China‟s entry into the WTO, there is much talk happening about granting of MES to China. (MES-When the exporting country is treated at par in terms of transparency and prices are known to be decided by the economic forces. What forbearing it has for India? For once a market economy status doesn‟t take the anti dumping prowess from you. It will be in the best interest if India does it earlier rather than becoming a mere follower to other countries. This has more political considerations rather than economic. It is also to be remembered that granting of MES to China will not have any effect on the trade deficit. On the upside, it will ensure that Indian manufacturers improve their efficiency at the earliest possible along with substantial developments in the infrastructural development. Investment linkages between India and China will also grow in coming times. Reforms need to be Implemented by WTO- The need of the hour is not the complete dismantling of Anti Dumping duties but some reforms to be implemented at the WTO level. The WTO rules and regulations in terms of the anti dumping measures are entangled with many rules and regulations. Reexamination of duties imposed after a certain time period, a maximum limit to the amount of duty imposed, making the concept of “Injury” clear, abolition of back to back cases, time taken for the finalization etc need to be worked upon Future Prospects- As all good things come to an end so will the heavenly rights enjoyed by China. The price of Chinese products in near future will be more realistic as IPR is enforced. The west too is realizing the huge trade surplus of GRAPHIC ERA UNIVERSITY

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China, the recent imposing quotas on Chinese textiles (Better known as the Bra War) bringing China to reality grounds. Also though China has maintained the price of its goods as static to capture large share in world volumes but it is sooner or later going to face the rising cost of raw materials. China would soon increase its prices when it enters the market economy status which is 2016 for US. We must not forget that India and China produce similar kinds of goods in terms of their export basket to the West. China has highly skilled labor and a comparative advantage in the assembly stage of technology. India has to improve its manufacturing process; Non tariff measures such as Anti Dumping will only prove to be detrimental. In many cases, it has been observed that the mere filing of a case leads to a total disruption of trade. Trade relations in the coming years between these two BRIC giants are bound to improve, China‟s imports are surging into India on account of their product diversification and competitiveness. The reality is that 72% of the products imported are at par with Indian Quality or even superior. The World today sits back to notice when a professor claims that in 2050 the trade relations between India and China will be the most important economic relationship in the world and these countries will drive the growth of the entire world leaving far behind the Giant four.

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CHAPTER - 6 CHINESE GOODS CHOKING THE INDIAN MARKET “CHINESE GOODS CHOKING THE INDIAN MARKET” In reference to the topic “CHINESE GOODS CHOKING THE INDIAN MARKET” we came to know various facts about Indian markets as well as Chinese market, as also how china is invading the Indian market in checked & thereby killing the Indian units. Some of the alarming facts in this regard are as follows: 

Chinese government offers a lot of tax benefits & subsidies to the manufactures as



Compared to Indian government, which results in high taxes on raw materials in India as compared to imported Chinese goods & hence Chinese goods cost lesser as compared to finished goods made in India. As a result, Chinese goods are becoming popular in India.



Chinese business have penetrated deep inside the Indian markets and as result crippling the Indian economy and its self sustainability. The range of markets engulfed by china vary from low priced toys of linen fabrics, batteries, porcelain tiles, compact fluorescent lamps, machinery, tyres, penicillin, radio, torches and DVD players and so on.

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Moreover, the cheap Chinese goods lack in terms of quality too. Some of the disadvantages of Chinese goods are:  lack of durability.  toxicity of goods.  No guarantee or back service. Threats that Indian industries are facing & going to face in near future due to the Inundating of Indian markets with Chinese goods is:1) Industries related to toys, fancy lighting, electrical accessories which are almost completely overshadowed with Chinese brands. 2) Now we are facing immediate threat as far as energy sector is concerned. 3) IT/BPO and automobile manufacturing companies are to face the challenge in next 2-5 years. 4) 80% of our dependence for power plant equipment is in china. 5) China has captured anywhere between 60-90% of India‟s $2.5-billion Toy market.

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Industries affected by invention of Chinese market in India:1) 60% of industrial units in the industrial belts of thane and bhivandi near Mumbai have been closed down. 2) The small-scale industry (SSI) contributes 35-40 % to the total Manufacturing In India and this is the most affected sector. 3) Even a health giant like Wockhardt had to shut down its Rs 100-crore plant producing acetic acid for vitamin C after a flood of Chinese imports.

Now after eyeing the impending disasters of the issue, the gathering was confronted with the following concerns 1) How can we stop invasion of Chinese market? 2) Why are we unable to stop the invasion of Chinese market? The students were exhorted to think on these lines and the unanimous decision was that at personal level we can take step like  Make people aware of Chinese invasion in India,  Harmful effects of Chinese goods,  Avoid buying the Chinese goods with conviction for some visible change to become apparent.

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CHAPTER - 7 CHINA GOODS IN INDIA

CHINA GOODS IN INDIA:1)

JKB35-30 low price mud brick machine China goods in India Min. Order: 1 Set FOB Price: US $9000-15000 / Set Place of Origin: CN; SHN; Power: 140Kw; Capacity: 11000PCS, 11000pcs/hour; Processing: Brick Production Line; Brand Name: Junxin Machine

2)

Tire recycling machine for tyre oil! China Goods in India! Min. Order: 1 Set FOB Price: US $25000-70000 / Set Place of Origin: CN; SHN; Type: Tire Machine, pyrolysis machine; Brand Name: Wharbo; Tire Machine Type: Tire Recycling Machine

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3)

Automatic fly ash brick machine making, China goods in India Min. Order: 1 Set FOB Price: US $17918-18628 / Set Place of Origin: CN; HEN; Power: 75 kw; Capacity: 14000-18000 pcs/hr; Processing: Brick Molding Machine; Brand Name: Longman; Method: Vacuum Extruder

4)

Mobile and moving China with good price price in India Min. Order: FOB Price: Place of Origin: Power: Processing: Brand Name: Condition: Brick Raw Material:

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concrete qmj4-45,

block making cement brick

machine made in making machine

1 Set US $1-3500 / Set CN; SHN; 7.4kw; Brick Production Line jinlong; New; Concrete

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5)

Good sale in Africa and India QTJ4-40 block machine with best service Min. Order: 1 Set FOB Price: US $3000-3500 / Set Place of Origin: CN; HEN; Power: 8.8kw; Processing: Brick Production Line; Brand Name: ZH; Condition: New; Brick Raw Material: Concrete 6)

Small clay brick machine hot sale in India Min. Order: 1 Set FOB Price: US $5000-500000 / Set Place of Origin: CN; JIA; Power: 132kw (Small clay brick machine); Processing: Brick Production Line; Brand Name: HW-Clay Brick Machine

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7)

Practical and high efficiency QT12-15 block making machine price in India Min. Order: 1 Set FOB Price: US $1-100000 / Set Place of Origin: CN; FUJ; Power: 40.7KW; Processing: Brick Production Line; Brand Name: HSM; Method: Hydraulic Pressure; Condition: New

8)

Good price!!! JKRL35 clay brick plant, clay brick plant in India Min. Order: 1 Set FOB Price: US $688-15000 / Set Place of Origin: CN; HEN; Power: 75kw; Processing: Brick Production Line; Brand Name: Yingfeng; Method: Vacuum Extruder; Condition: New

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9)

QTJ 4-20 Hot Sale in India Automatical brick making machine high efficiency good quality Min. Order: 1 Set FOB Price: US $5000-59700 / Set Place of Origin: CN; HEN; Power: 10.1KW; Processing: Brick Production Line; Brand Name: Song ling Tengda; Method: Hydraulic Pressure; Condition: New

10)

Paving Block Making Machine in India for sale with good price Min. Order: 1 Set FOB Price: US $7000-8610 / Set Place of Origin: CN; HUN; Power: 6.2 KW; Capacity: 8,640 pieces/Day (8 hours) (paving stocks); Processing: Brick Production Line

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CHAPTER – 8 FINDINGS Pros & Cons: Pros & Cons + Positive aspects Relatively Cheaper than the regular/known brands. Advanced Features Affordability, common man can easily purchase. Widely available Higher profit margins for dealers. - Negative aspects Unsafe products Non Long-lasting Resulted in closure of many businesses, which lead to unemployment, lower turnover. Outflow of capital Increased in Imports & Media has recently highlighted the technical issues about the Chinese products. E.g. The continuous explosion in china phones, has resulted in the ban of Chinese phone retailing in Indian market.decrease in exports. And those phones are:BLUEBERRY NOT BLACKBERRY Same design Same colour shade May be having advanced features Very cheap Same has been done to various products and brands e.g. Apple iphone, Because of cheaper prices products made in China are becoming more popular among the Indian masses. This has had a very negative effect on our own manufacturing units and as a result many of them have had to shut shop. There seems to be no way to escape the DRAGON!!! The Chinese goods have invaded almost all the sectors of Indian market and seem to be bringing tougher times for the Indian Industry. Because of wide availability GRAPHIC ERA UNIVERSITY

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of cheap and apparently technologically advanced Chinese goods, many economists fear decline of local manufacturing units or the small-scale industry in India. The rise in demand and sudden popularity of Chinese products, which are available at cheaper prices, is giving nightmares to the Indian industry to the extent that they have started sticking “Made in China” stickers on their products to boost their sales. Chinese manufacturing units produce goods on a large scale. They are using the big Indian market merely to dump their products and by doing so they are killing the Indian units. For example last year during Diwali, China made crackers were sold in the Indian market. These crackers reportedly contained Sulphur. Sulphur is more harmful than Nitrate, which is used in India to make crackers. Since the Chinese crackers were cheaper than the Indian crackers, so they managed to attract gullible and largely illiterate Indian lot. As a result the Indian cracker industry saw a decline in the revenue. For India China is major competitor in sectors like software, hardware, and electronics etc. We should not allow China to dump their excess produce here. The small-scale industry (SSI) contributes 35-40 per cent to the total manufacturing in India. So it is the SSI, which suffers most because of Chinese goods? For instance, data reveals that 60 per cent of the industrial units in the industrial belts of Thane and Bhivandi near Mumbai have been closed down. Many small-scale GRAPHIC ERA UNIVERSITY

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Indian companies have stopped manufacturing their own goods as now they import them from China. That‟s why many Indian workers have lost their jobs. This shows that the objective of SSIs of providing employment to the rural youth of India is defeated completely. In the last one decade Chinese labour has developed the skills of manufacturing electronic goods like semi-conductors, telecom equipment, power equipment etc, which helped them to capture big markets of America and Europe. It is no surprise that they have been successful in capturing the Indian market too. Although Indian labour can meet these challenges by improving their skills, the Indian manufacturing scenario is hampered due to stringent and weak labour policies. It is the high time that our political leaders change their mindset and bring about the right kind of reforms without losing precious time in endless discussions. We must take necessary steps so that we do not fall prey to the DRAGON‟s designs of capturing a major share of our growth, which could prove to be a setback for our economy in the future.

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CONCLUSION China and India had similar development strategies prior to their breaking out of their deliberate insulation from the world economy and the ushering in of Market-oriented economic reforms and liberalization. China began reforming its closed, centrally planned, non-market economy in 1978. India always had a large private sector and functioning markets which were subject to rigid state controls until the hesitant and piecemeal reforms of the 1980s. These became systemic and far broader after India experienced a severe macroeconomic crisis in 1991. The political environments under which reforms were initiated and implemented in the two countries and their consequences were very different. India continues to be an open, participatory, multiparty democracy, while China has an authoritarian, one party regime, though it is liberalizing. After recounting the differing rationales as Well as the similarities and differences in the content of their reform agenda, I Reviewed in Srinivasan (2002) the achievements of reforms and remaining Challenges, particularly regarding reforms of state owned enterprises (SOEs). I concluded with an analysis of the competition between China and India in world markets. This is concerned with external sector issues, in particular, the spectacular performance of China relative to India in their competition in world markets as well as the emerging perception in India of the opportunities in the GRAPHIC ERA UNIVERSITY

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large and rapidly growing Chinese markets. It also notes the protectionist backlash that China‟s growing dominance in world trade and India‟s success in Information Technology have induced in the US and Europe.

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BIBLOGRAPHY  Wikipedia- Google search engine  Investopedia  www.made-in-china.com  www.china2you.in  www.mamagementcanvas.iimindore.in

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