Indian MSMEs bear the brunt of cheap imports from China: GTRI study

No amount of import duty can make Chinese goods costly in India, or is it that Chinese goods are not dependent on ports or other entry points to enter the country. India has failed to stop cheap Chinese products from hurting Indian business, especially micro, small and medium enterprises (MSMEs).

While many of these products are also made by MSMEs in India, local manufacturers find it hard to compete in the market against dirt cheap Chinese products, research firm Global Trade Research Initiative (GTRI) stated in report.

This is more evident in the toys market where Chinese toys still hold sway despite the government tightening quality norms and imposing import duties of 20 to 70 per cent on import of Chinese toys.

According to GTRI, there is a rush of imports of products like umbrellas, artificial flowers, articles made of human hair, leather goods and toys from China.

According to the GTRI report, 96 per cent of umbrellas as also 92 per cent of artificial flowers and human hair articles sold in India came from China. 

China also has a 60 per cent share in the market for glassware in India, while 54 per cent of leather goods and 52.5 per cent of toys also come from China. 

China also has 51.4 per cent of the market for ceramic product and 51.2 per cent of the market for musical instruments in India, all instances of Chinese imports local production and Indian artisans loosing their livelihood.

Even in areas where Chinese imports have less than 50 per cent market share, Indian manufacturers are struggling to cope up with market competition from Chinese goods. 

These include 48.7 per cent of products such as furniture, bedding, and lamps; 39.4 per cent of tools, implements, and cutlery; 49.3 per cent of products like stone, plaster and cement; 47 per cent of base metals; 31.8 per cent of carpets. Such imports are pushing small businesses in India to a corner, the study finds.

Between January and June 2024, India’s exports to China stood at $8.5 billion while imports from China stood at $50.4 billion - a trade deficit of $41.9 billion, GTRI points out.

Indian investors are avoiding areas where cheap Chinese products pose threat and this has led to a situation where China has no competition in India.

As of now, about 98.5 per cent of India’s imports from China, accounting for about $49.6 billion, are industrial goods. This also forms 29.8 per cent of India’s overall industrial goods imports.

This is an area of grave concern as such imports are not only hurting industry, but also deterring investment in several industries, the study points out.

For the first half of the year, India accumulated a trade surplus with 151 countries, including key partners like the US and the Netherlands. These countries, account for 55.8 per cent of India’s exports and 16.5 per cent of its imports, totaling $72.1 billion, GTRI points out.

On the other hand, India registered a trade deficit with 75 countries, including China and Russia. These countries accounted for 44.2 per cent of the country’s exports and 83.5 per cent of its imports, resulting in a trade deficit of $185.4 billion, according to the GTRI study.