Impact of Chinese goods on Indian industries

Be it anything from needle to toys, electronic gadgets, hot water bottles, Diwali crackers you will find the Chinese version of the same in India at much cheaper price. The price of Chinese goods is 10-70% lower than that of Indian goods. Low price, bulk availability, and variety are some of the favorable features of the Chinese goods in India. Chinese products in huge quantity are put into Indian market and adversely affecting the Indian units. Chinese goods are not only affecting the domestic business and Indian market but also affecting the export market of our country. Indian goods are being replaced by ‘Made in China’ label both in India as well as abroad. Made in China label is slowly capturing the every segment of Indian market such as electronic goods, textile and garment industry, toys, medicines, car components etc.

Chinese products are mostly low on quality. Such as last year, on Diwali, Indian market had been flooded with Chinese crackers containing Sulphur. Sulphur is dangerous than Nitrate used by Indian cracker makers. Their low price attracted lots of buyers which really affected the revenue of the Indian cracker industry.

Another industry that has been affected so badly by the Chinese version is the toy industry in India. As per the reports of the ASSOCHAM there are so many Chinese toys in the market that Indian toy industry is finding very hard to survive. In the last 5 years near about 40% of the Indian toy companies have been shut down. Rest 20% are on the verge of closing down. In the last 4-5 years near about 2000 SMEs have been closed down. The ASSOCHAM has also revealed that China has the largest toy market in the world and enjoys 45% of the total share whereas India has a very little part in this and enjoys just 0.51% share. Indian manufacturers serve 20% of the market and the rest is served by China and Italy. In the period between 2001-2012, the total import of the Indian toy industry has increased by 25.21%. It is expected that toy industry will grow further. Chinese products have also led to the shutdown of 60% of industrial units in Thane and Bhivandi. Hence there are many industries and manufacturers who are facing the heat of Chinese competition.

Chinese works on the strategy of mass production and mass consumption. Main reason of their low cost is the low capital investment and export friendly policies of the Government in China. China is buying raw material from all across the world and selling the end product back to the world. China is the second largest exporter in the world after Germany. It has been predicted that China will also cross Germany in the export by the World Trade Organization (WTO).

Chinese goods are relatively cheaper, widely available and give huge profit to the dealers. But on the other hand Chinese electronic goods are not safe, of inferior quality and come without guarantee or service. These do not last for a long period of time, Chinese goods in India has resulted in the closure of many manufacturing units. Chinese manufacturers are generally bulk manufacturers and have a very structured vendor base. Also the supply chain cost in China is very less as compared to India making the products further cheap. In addition to this low cost of raw material, high productivity per person, and less indirect taxes and import duties make their good further cheap. Incentives to boost export and subsidies further boost the production.

Some manufacturers in India are even importing Chinese goods and selling these under their label. Indian manufacturers are especially importing the non-branded smartphones from China and selling these with warranty and service. In order to sell dual-SIM smartphones in India China Wireless Technologies tied up with Reliance Communications, India’s second-largest telecommunications service provider.

India must look into its administration to reduce the import of Chinese goods. Our economy is agriculture based and slowly service sector is also getting into it. But the most important contributor to our economy is agriculture. Labour force is available in huge number but ways to earn money are reducing. This is happening because natural resources are reducing which is leading to a significant reduction in agriculture. Poor infrastructure is another problem in India which is adding to the time and cost of production. Government should encourage local small business enterprises to reduce the foreign goods in the market.

To safeguard the domestic manufacturers from the Chinese goods there is a dire need to change the policies and add duties. Apart from this India seriously needs to work on its infrastructure and efficient use of energy and other natural resources to compete at cost level and quality.

Do you prefer Chinese goods over Indian goods?

Related information:

Chinese Products Banned in India on this Diwali

Union Budget Expectations 2014-15