- Imports of goods from China hurting Indian MSMEs: GTRI
Jammu, Sept 01: Asserting that India has a “special China problem” which is over and above the world’s “general China problem”, External Affairs Minister S Jaishankar said Saturday the border and the state of relations with the country call for investments from there be scrutinised.
Jaishankar said that if people are complaining of trade deficit with China and “we are too”, it is because decades ago, “we consciously overlooked the nature of Chinese production and the advantages which they enjoyed in a system where they got a level playing field with all the advantages they brought to bed”.
“China in many ways is a unique problem because it is a unique polity, it is a unique economy. Unless one tries to grasp that uniqueness and understand it, the judgements, the conclusions and the policy prescriptions flowing out of it can be problematic,” he said at the ET World Leaders Forum in New Delhi during a session titled ‘New India’s Risks, Reforms and Responsibilities’.
“There is a general China problem. We are not the only country in the world which is having a debate about China. Go to Europe, and ask them what is among their major economic or national security debates today. It is about China. Look at the United States (of America). It is obsessed with China, and rightly so in many ways,” Jaishankar said.
So, the fact is that it is not only India which has a China problem, he said.
“India has a China problem… a special China problem that is over and above the world’s general China problem,” Jaishankar said.
“When we look at trade with China, investments with China, exchanges of various kinds with China. If you neglect to take into account that this is a very different country with a very different way of working, I think your basics start to go off track,” he said.
“Once you understand that because there is a general problem with China as well as our own situation, all of you know we have a very difficult situation at the border for the last four years. I think the sensible response to it is to take the precautions that a country like India is taking,” the minister said.
It has never been the government’s position that it should not be having investments with China or doing business with China, he stressed.
“On the investments issue, it is common sense that investments from China would be scrutinised, I think the border and state of relations between India and China call for it,” Jaishankar said.
But countries that do not have a border with China are also scrutinising investments from the country, he added.
“Europe does not have a border, America doesn’t have a border with China and yet they are doing that. The issue is not do you have investments with China or not, it is not a yes or no answer, it is what should be the appropriate level of scrutiny and how should you handle it,” the minister said.
“Sometimes when I read stuff where people write that we should clearly identify that this as national security, it doesn’t work that way anymore because what is national security has expanded. If your telecom is based on Chinese technology, can you be impervious to it,” he asked.
“In my view, at a certain level, with certain countries in certain situations, the line between economics and security is a very thin line,” Jaishankar said.
During the session, he also noted that there is a major war in Europe, a huge conflict in the Middle East, there are tensions in Asia and the revival of territorial claims and border frictions with each one of them mounts risks, he said.
The focus of the world is on de-risking, Jaishankar asserted.
The external affairs minister highlighted that every government is now closely evaluating geopolitical risks, with the majority of efforts focused on de-risking.
He emphasized that in the current global landscape, managing and mitigating risks has become a central concern in shaping international relations and policies.
Meanwhile, according to think tank GTRI, increasing imports of goods such as umbrellas, toys, certain fabrics, and musical instruments are severely hurting MSMEs as many of these products are also made by domestic businesses.
The report said that during January to June 2024, India exported goods worth only USD 8.5 billion, while imports stood at USD 50.4 billion, resulting in a trade deficit of USD 41.9 billion.
This low export and high import makes China India’s largest trade deficit partner.
“China accounts for 29.8 per cent of India’s industrial goods imports. India must invest in deep manufacturing to cut dependence on import of critical industrial products from China,” Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said.
He said that these imports from China are “hurting” Indian MSMEs, as many of the imported products are also made by these local businesses.
He noted that the cheaper Chinese goods make it tough for MSMEs to compete, leading to struggles for survival.
“Some MSMEs have to shut down or reduce their operations, and they find it hard to grow due to the easy access to low-cost Chinese products. These challenges affect job creation and economic growth in India,” Srivastava said.
The GTRI data analysis stated that China supplies 95.8 per cent of India’s umbrellas and sun umbrellas (USD 31 million) and 91.9 per cent of artificial flowers and human hair articles (USD 14 million).
Additionally, glassware (USD 521.7 million, 59.7 per cent), leather articles including saddlery and handbags (USD 120.9 million, 54.3 per cent), and toys (USD 120.2 million, 52.5 per cent) are seeing a similar trend, severely impacting domestic manufacturers, it said.
Even in ceramic products (USD 232.4 million, 51.4 per cent) and musical instruments (USD 15.7 million, 51.2 per cent), where Indian artisans once thrived, the dominance of Chinese imports is displacing local production, it added.
Also, Indian MSMEs are struggling to compete in industries such as furniture, bedding, and lamps; and cutlery.
“These are sectors where Indian small businesses have traditionally been strong but are now losing ground due to the influx of Chinese goods,” it said, adding products like articles of stone, and carpets are under threat, diminishing the competitiveness of local producers.
According to the GTRI’s data, silk import stood at USD 32.8 million from China, which is 41 per cent of India’s total imports of silk during January-June 2024.
Srivastava said that India urgently needs to invest in deep manufacturing to reduce its reliance on critical industrial imports, especially from China.
“The heavy reliance on Chinese imports is eroding the market share and survival of Indian MSMEs. Strengthening domestic manufacturing is essential to protect these small businesses and maintain India’s economic independence,” he added.
