Even as India and China give final touches to a joint study group report on enhancing trade ties, the domestic industry, especially the electronics sector, is facing an unprecedented threat from Chinese imports.
However, in sectors like ceramic tiles and toys, things are a notch better as quality concerns have given the domestic industry an edge over the Chinese goods.
Concerned by Chinese imports and domestic policy impediments, electronics manufacturers have approached the National Manufacturing Competitiveness Council and the commerce and finance ministries for incentives.
"The electronics industry, especially components manufacturers, have been hit hard because of imports, especially from China," said Vinod Sharma, president of the Electronic Industries Association of India.
The $15-billion electronics sector grew 15 per cent in 2006-07, which analysts said was export led. A Frost and Sullivan study has projected that the demand in the Indian market will grow from $25 billion in 2005 to $320 billion in 2015.
"If our domestic industry is not encouraged, India will become an import-driven market," said Sanjiv Narayan, managing director of SGS Tekniks Pvt Ltd.
Narayan's concern stems from the fact that the imports of Chinese electronics and electrical goods increased by 56 per cent in 2005-06 to $ 2.77 billion. In April-December 2006-07, imports stood at $ 2.95 billion.
"Our margins are 7.5 per cent while the Chinese margins are above 15 per cent," said Sharma. The ceramic tiles sector, valued at $1.46 billion, has also been feeling the heat of Chinese imports over the past few years.
"The sector may be recording a 15 per cent growth but prices have been falling because of Chinese imports. As a result, margins have taken a hit of 7-8 per cent," said Vijay Aggarwal, managing director of H&R Johnson Ltd and former president of the Indian Council of Ceramic Tiles and Sanitaryware.
Aggarwal said the $460-million vitrified tiles industry had been the worst-hit and many companies had shut shop. The government imposed an anti-dumping duty on vitrified tiles from 2002 to 2007. This has been extended this year. He, however, believes the bad days won't last for long.
"Chinese tiles are of inferior quality and Indian buyers are realising this. In the next two years, Chinese imports won't matter to us," he said.
India imported Rs 500 crore (Rs 5 billion) worth of Chinese tiles in 2006-07. Things are also better for the toy sector, which two years ago was feeling the heat of cheap Chinese imports.
"At the toy city in Greater Noida, 80 of the 118 applicants surrendered their plots as Chinese imports forced closure of 80 per cent of the units. These applicants want to set up the units again but there is no land available in the toy city," said Paresh Chawla, chairman of the Toy Association of India.
Half the $ 610-million industry is dominated by Indian toys, the other half being Chinese.
"Inferior toys made in China have helped the Indian industry regain its position. The industry is going to increase its size by at least five times in the next five years," said Chawla.
