Indian solar modules were among the world’s best-in-class exports until 2011. Industry pioneers include Tata Power Solar Systems Ltd, Moser Baer, Bharat Heavy Electricals Ltd, Indosolar Limited and Lanco Infratech Ltd. Currently, the Indian solar industry heavily relies on imports such as solar cells, modules, and inverters, and in 2019-20, the country imported solar wafers, cells, modules, and inverters worth $2.55 billion. Observations made by the solar cell, module, and inverter industries are applicable to many others including toys, steel, telecommunications, and pharmaceuticals. China is a common culprit.
The textile industry in India is also facing challenges from Chinese imports of manmade fibres like polyester, viscose, and blends, resulting in 35% of power looms being closed in Surat and Bhiwandi. Currently, the GST structure taxes synthetic fibres at 18%, yarns at 12%, and fibres at 5% (the inverted duty structure) which has benefited China unintentionally. A surge of Chinese fireworks in the Indian market also adversely affected the Indian fireworks industry, which mainly consists of MSME companies.
In addition, most Chinese crackers contain potassium chlorate, a highly explosive chemical banned in India. Lax enforcement has resulted in the entry of under-invoiced Chinese bicycles into the country. Furthermore, Chinese imports have virtually decimated the domestic toy industry. India will import 75% of its domestic demand in 2021, mainly from China. Likewise, the continued suspension of countervailing duties on imports of stainless steel from China has led to a massive increase in imports.
During the first half of 2021-22, India saw a 185% increase in stainless steel flat products imports when compared to the average monthly imports for the previous fiscal. This adversely impacts the MSME segment, which supplies household items (utensils). In the first half of this fiscal year, imports from China and Indonesia increased by 300% and 339%, respectively, compared to last fiscal’s average monthly imports.
China continues to be an important supplier of telecom transmission equipment to India as well. India is completely dependent on China for imported APIs of paracetamol and streptomycin and is also highly reliant on other antibiotics like ciprofloxacin and amoxicillin. China is well known for dumping its products on international markets. Deflation occurs when domestic prices are lower than export prices, causing injury to other countries’ producers. Economies of scale in production, being more productive, surplus capacity, government subsidies, etc. have all contributed to China selling at a cheaper price.
Many multinational corporations entered into joint ventures with Chinese firms after China’s entry into the WTO in 2001, transferring their technology and making the latter more productive. As a result, China can also procure material inputs (used for manufacturing final outputs) at a lower price from Africa and the Greater Mekong Sub-region. Government-controlled companies account for a large portion of exports. Access to finance is not a problem for China’s government-aided firms, unlike India’s MSME sector.
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Export rebates amounting to 17% are offered by the Chinese government to their exporters. This makes Chinese goods imported substantially cheaper than their Indian counterparts. Additionally, regional provinces in China extend incentives and rebates on their tax structures to attract industries to their region in addition to promoting exports through sizable incentives (even on software downloads and logistics compensation for long-distance freight), which makes Chinese products cheaper.
Additionally, the Chinese central bank makes the Chinese renminbi undervalued on the international markets. This imbalance in Indian and global markets has reduced the competitiveness of Indian products in domestic markets, and has caused material injury and persisting financial stress for Indian businesses. Indian policies are to blame for the loss. Chinese products are subjected to antidumping and antisubsidy duties around the world because of these practices.
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