Increased import of Chinese goods hurts Indian MSMEs

Increased import of Chinese goods into India is impacting micro, small and medium enterprises, according to the ministry of micro, small and medium enterprises.

In eight major product categories that are predominantly manufactured by MSMEs, imports from China grew faster than their respective imports from all countries in the four years from 2008-09 to 2011-12.

The ministry’s finding is based on data compiled by the Directorate General of Commercial Intelligence & Statistics.

The eight product groups include electrical and electronics, mechanical and metallurgical products, chemicals, glass and ceramics-based products.

These accounted for 54 per cent of India’s total imports from China in 2011-12.

Considering that there are a large number of MSMEs present in these sectors, a significant proportion of Indian MSMEs are facing greater competition from China compared to the rest of the world, said the ministry.

Meanwhile, industry body Assocham has stated that around 1,000 SMEs producing colours, squirt guns and other items used in the Holi festival have closed down owing to increased imports from China.

An Assocham survey of 1,500 Holi colour manufacturers and related traders in various parts of north India, conducted in March this year, said that Chinese squirt guns now accounted for almost 95 out of every 100 squirt guns sold in north India.

A large number of Indian squirt gun manufacturers have shut shop and almost 10

lakh people have lost their jobs, the survey said.

Another Assocham study has stated that imports of ceramic products from China has virtually led to the closure of smaller ceramics manufacturing units in India.

Ceramics imports from China, at around Rs 2,700 crore ($497 million), account for almost 64 per cent of India’s total ceramics imports, with Germany and France accounting for seven per cent and four per cent, respectively.

The Assocham study said the rate of growth of ceramics imports from China has shot up from eight per cent a few years ago to more than 42 per cent currently.

This huge volume of imports at cheaper prices has impacted the profit margins of the Indian ceramics industry and smaller firms are almost on the verge of closure, it said.

According to a 2012 study by the department of industrial policy and promotion in the ministry of commerce and industry, the basic goods and intermediate goods sectors were negatively affected by cheap Chinese imports along with some items in the capital goods and consumer goods sectors.

The study said that China has become the largest source of India’s imports, with a 11.7 per cent share in total imports.

The report said India is an easy target for Chinese exports because its manufacturing sector is struggling to improve its relative strength in the economy (manufacturing share in GDP is stagnant), manufacturing for export is to an important extent done by SMEs or is based on the use of imported raw materials.