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Atmanirbhar Bharat: Do Indian buyers have the mindset to ignore Chinese products?

By NS Venkataraman*
India imports several essential and non-essential products from China ranging from buttons, zippers, toys and furniture to chemical and pharma products such as ibuprofen, paracetamol, and citric acid, as also electronic goods and solar equipment. This is happening despite the fact that India has the skill and knowledge to make most of these products.
If required, India has the capacity to acquire necessary skill to manufacture products which are currently imported from China. Only proactive policies are required for this.
In 2019, India’s import from China was to the tune of 65. 83 billion USD and exports to China was 17.1 billion USD. India’s import of pharmaceutical products from China increased by 28% in 2018-19 compared to the import in 2015-16. On the other hand, most of the exports from India to China are natural products, such as mineral ore, which are not value added products.
If one does an in-depth analysis of the potential skill and capabilities of Indians vis-a-vis that of Chinese, one can find there is not much of a difference. Yet, while evaluating the prospects of the Atmanirbhar Bharat scheme launched by the Prime Minister, one has to examine whether there is mindset problem in India among Indian buyers, including industries, individual consumers and traders.
Several examples can be readily cited to prove the mindset issue. Indian buyers are found to opt for earning quick, easy cash profit, even at the cost of domestic industry. An example would suffice to indicate the mindset issue.
India was producing vinyl acetate monomer (VAM), an important chemical and building bloc for the production of several derivative products with huge demand potentials, that was produced from ethanol. Two large Indian producers were involved in production and both of them stopped production of VAM, and started importing VAM from China for their own consumption and for marketing in India due to low price of the Chinese products.
Instead of optimizing the product pricing to ensure competitiveness with Chinese products, both the units stopped the manufacturing facilities and started importing it and in the process they seemed to think with glee that they were making profits by importing the product than by manufacturing it in India. Several case studies point to similar situation in several sectors, including chemicals, pharmaceuticals, automobiles, electronics, consumer products etc.
For Atmanirbhar Bharat to succeed, the battle has to be fought in the mindset of the Indian buyers operating in different sectors. They should be convinced to prefer to buy Indian products and must extend support to the domestic sector. When massive quantity of products are readily imported, local manufacturers find it difficult to sustain their production operations, as huge imports at low price from China largely throw them out of the market.
In the event of unequal competition and import dumping from abroad in the case of some products, Indian manufacturers may need some breathing time to optimize the process operations in tune with the international trend, so that they can withstand the competition not only in India from imported products but also internationally.
While imposing safeguard duty, the Government of India has taken a lenient attitude in the case of products from China due to the pressure from Indian buyers/importers
Even when Indian products are of reasonable quality vis-a-vis the products that are imported, the problem of import dumping from China at low price exists, alongside Chinese producers providing high credit terms to Indian buyers, one reason why Indian buyers prefer Chinese products at a low price. The Chinese government provides hidden incentives to the producers in China to export their products at low price.
The Chinese companies’ credit terms are often for six months from the date of bill of lading after opening irrevocable letter of credit by the Indian buyers/importers. This means Indian buyers can import the products and use the products and pay only after six months. In the process, Indian producers are unable to compete with imported Chinese products in Indian market.
The Government of India should encourage and help Indian producers by imposing safeguard duties on several Chinese products imported in India in large quantity. It can justify such safeguard duty by stating that China has a non-market economy, which has been confirmed by the World Trade Organization (WTO) in a recent judgement. 
China spent four years fighting for market economy status in WTO, a designation that would have give it stronger footing in exporting products, while curtailing the ability of other countries to retaliate over trade disputes. However, China lost the battle in June 2020.
The resolution is a major setback for China, as it comes amidst the European Union (EU) stepping up efforts to limit its expansionist practices into the European continent. On the same day that China allowed the dispute to lapse, the EU announced an unprecedented attempt to block China’s subsidies to exporters. The 27 nation bloc would also unveil a proposal to protect European companies from Chinese takeovers.
The US and the EU have not considered Chinese price reliable and for decades. They have calculated Chinese anti-dumping duties in favour of data from third countries that adhere to free market forces. That has allowed them to add extra duties on Chinese imports that help keep their domestic producers competitive.
However, while imposing safeguard duty, the Government of India has been taking a lenient attitude in the case of products from China due to the pressure from Indian buyers/importers. Thus, India bought 20 percent more solar modules and cells from China in 2019-20 compared with the previous year, in volume terms – showing that the 15 percent safeguard duty that was imposed on Chinese products for that year was not effective.
In 2018, the Government of India imposed 25 percent safeguard duty on solar modules and cells (cells are assembled to make modules) imported from China and a few other countries, applicable for one year from July 30, 2018 to July 29,2019. The rate of duty was reduced to 20 percent and 15 percent for next two half year periods.
The pity is that when import dumping inquiry are conducted, Chinese suppliers get support from Indian buyers, indicating that for Indian importers and buyers love for profit is of paramount importance.
---
Trustee, Nandini Voice for the Deprived, Chennai

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