Import curbs on China likely as deficit grows

Discussion in 'Economy & Infrastructure' started by thakur_ritesh, Oct 31, 2011.

  1. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    NEW DELHI: India's widening trade gap with China has triggered an alarm in the government, forcing it to brood over a host of measures to restrict imports from the country.

    The commerce department has hammered out a "China Strategy" that calls for higher tariffs on most Chinese goods while proposing a complete ban on specific items, like power and telecom equipment. It also suggests making it mandatory for Chinese firms to enter into joint ventures with Indian companies before they could import heavy equipment and machinery from the country.

    The move comes as India's trade deficit with China, its biggest trading partner, jumped 160% to $23.9 billion in the five years to 2010-11. Trade deficit is the gap between what is imported and exported and a rise in spread indicates India's increasing dependence on China.

    "China has already taken over our power sector and is ruling the low-end market for mobile phone handsets," a senior official in the commerce department told ET on condition of anonymity. "If we do not step in now with suitable policy measures, our trade gap with China will rise further."

    While imports of Chinese goods rose to $43.5 billion in 2010-11 from $17.5 billion in 2006-07, exports lagged far behind, up to just $19.6 billion from $8.3 billion over five years.

    Indian officials say China acknowledges that trade imbalance is a problem, but it has done little to address it. The commerce department said Beijing has ignored seven specific requests from Delhi to ease imports of Indian goods that could have narrowed the trade gap significantly. These requests, made by Commerce and Industry Minister Anand Sharma during his Beijing visit last year and reiterated during ChinesePremier Wen Jiabao's New Delhi visit last December, included import relaxation for Indian pharmaceuticals, agricultural produce, IT products and heavy machinery.

    "China promised us almost two years back that it would work towards helping us bridge the trade deficit, but has not yet taken any significant step," the official quoted earlier said.

    China's lack of response forced the commerce department to plan measures aimed at restricting imports and boosting exports of value-added products, the official said, adding that the ministries of finance, power, telecom and home would be consulted once the strategy is ready.

    The department also plans to encourage substitution of Chinese goods with those items from South Korea andJapan that face low tariff barriers.

    Experts, however, say restricting Chinese imports will not be easy. "Even if we ignore the WTO rules and its ramifications, there is just too much peer pressure," said Biswajit Dhar, director general of RIS, a Delhi-based think tank for developing countries.

    "In the G-20 forums, countries are constantly harping on ways to keep market open and such steps would be frowned upon." Besides, experts say, such measures could scare off foreign investors from India. "Restriction on Chinese investments could raise concerns that they could be extended to other countries as well," a trade analyst said. But Indian officials do not agree.

    "We are aware of all existing rules and policies and there are ways around everything," the official said.Reliance Communications, the telecom firm led by Anil Ambani, signed a deal in March to borrow $1.93 billion from China Development Bank. This included $1.33 billion for refinancing 3G spectrum fee payment and $600 million for equipment import from Chinese vendors.

    Fixing trade imbalance: Import curbs on China likely as deficit grows - The Economic Times
     
    Singh and sesha_maruthi27 like this.
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  3. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

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    Good this must have been done long ago to reduce the Chinese influence in the INDIAN Market. This is because of the present GoI's foreign and foreign trade policy.
     
  4. no smoking

    no smoking Senior Member Senior Member

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    "working to bridge the gap" should be the effort from both sides, not only china's responsibility.
    At the moment, india clearly has the advantage in producing the low cost products considering its huge population, however india just give it up. Meanwhile, india has put retrictions on its raw materials exportation. So, as the result, what you want the chinese to buy from india?
     
  5. mayfair

    mayfair Elite Member Elite Member

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    Finished products- like steel instead of iron ore, textiles instead of cotton and so forth.
     
  6. Yusuf

    Yusuf GUARDIAN Administrator

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    When china is not listening to Indian requests about import restrictions on Indian products and services why are we so overly concerned about them?
    On another note, the figures are misleading as to how much money is going out from India. I know importers in delhi and mumbai who bill at just 10-20% of the actual value to save import duty. A lot more money is going out via the hawala channel and the actual trade deficit is a lot more.

    The government will actually do well to help Indian manufacturing sector rather than look at ways to curb trade. India can be as competitive as china but we can't because of red tape, corruption etc just to start with. India can be just as competitive. Govt ha ago form a good policy and support Indian manufacturers.
     
  7. Ray

    Ray The Chairman Defence Professionals Moderator

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    Time to curb indiscriminate import.
     
  8. Yusuf

    Yusuf GUARDIAN Administrator

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    Percentage wise, major imports are in the sectors that can be replaced by Indian manufacturers. Electronics, toys, industrial hardware etc.

    Indian government is the freaking problem as it has done nothing for promotion of manufacturing.

    That said India should impose 20% additional duty on Chinese imports, not as anti dumping duty but to offset the currency manipulation.
     
  9. Ray

    Ray The Chairman Defence Professionals Moderator

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    I am sure you heard what Premji had to say!
     
  10. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    this was long-long-long over due.

    from the article, something india has been pushing for long. china has on many occasions said a yes, but never implemented.

     
  11. Virendra

    Virendra Moderator Moderator

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    Perceiving India China as competitive peers of Asia sounds silly when the equation between the two is so imbalanced.
    For the time being these protective measures could mitigate major issues but Yusuf is right, we have to look inwards rather than bicker about China.

    Regards,
    Virendra
     
  12. Yusuf

    Yusuf GUARDIAN Administrator

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    No sir, what did he say?

    BTW wipro imports electronics from china and stamps it's name in it. Wipro was caught some time back for trying to by pass import duty using technicalities.
     
  13. Rahul92

    Rahul92 Senior Member Senior Member

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    I strongly recommend special dumping tax on these goods which will make our Indian goods look cheaper
     
  14. Ray

    Ray The Chairman Defence Professionals Moderator

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    He said the govt is moribund.

    No decision making!
     
  15. Yusuf

    Yusuf GUARDIAN Administrator

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    Let me tell you guys what's happening at least in my line of business which is industrial hardware.

    A lot if manufacturers have stopped doing so and have instead started to import with their brands.
    Those who are still dug in are struggling. A lot of them are not ready to make capital investment as they don't know if it would be worth doing so or better to stop manufacturing and start to import.

    We have seen what has happened with the Maruti plant. We have seen what happened to TATA in singur. All this only adds to the cost of manufacturing. Add to this harassment by tax authorities be it excise or sales tax. An exporter who can claim excise duty drawback has to pay a percentage of it to claim it. Too many barriers and road blocks are there. A reason why the west chose an authoritarian china who opened itself up to do business over a democratic India who keeps putting up road blocks at every stage of business.
     
  16. no smoking

    no smoking Senior Member Senior Member

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    Yes, that is a good strategy but doesn't work for india.
    Just use the 2 examples of yours: steel and textiles: unfortunately, china are the biggiest producer and exporter of these 2, which means that india cannot compete with chinese manufacturer in the low end of these industries. Regarding the high end products, india is lagging behind Japan, Korea, Taiwan on both quality and price.

    Not to mention that india domestic manufacturing companies are still struggling to fullfill its domestic demand. Do you really think they have spare capacity to compete in china?
     
  17. pmaitra

    pmaitra Moderator Moderator

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    Place import duties on PRC made products.

    Let the people who really need them buy them and the government can make some money out of it. If they don't buy it, then at least the money stays within India.

    Allowing for a trade deficit with PRC, India is only hurting itself.
     
  18. Yusuf

    Yusuf GUARDIAN Administrator

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  19. SLASH

    SLASH Senior Member Senior Member

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    How about having a price band for every product? By putting additional duties the government will only benefit the under invoicers. It is the honest traders that will be most affected by additional duties. They have already started having price band for several products.

    Lets say you the cost of the cheap product is $1. The under invoicers would bill it at $0.5 to save custom duties and pay the remaining via hawala. Now if the government takes a stand and puts price band and say that this particular product cannot be lower than $1.5 than it would not be possible for trader to bill it at a lower price.

    This will have several advantages:
    1) Encourage honest traders to get goods at the right price
    2) Increase the governments treasury
    3) Improve the overall standard of products

    Remember the Chinese are good at manufacturing cheap products. The products do not last very long but they are cheap. It has a become a bad habit to buy things which we do not even use because it was cheap. I have done it many times. We do it just for the sake of it. It also affects the environment in a big way. These products are not durable there the user will dispose them when its of no use.

    Not too long ago my uncle bought a cheap copy of the iPhone. His logic was that this phone come with no warranty, but he think it will last for a year. But the iPhone is four times more expensive than the copy. So he could buy four of those that would last him for four years. What a waste of resource...

    Its not only about phones but also toys, machinery, shoes, furniture, etc...

    Buy things that are durable. It would cost you the same at long term.
     
  20. Yusuf

    Yusuf GUARDIAN Administrator

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    Yes they are already doing it for certain products where there is a chance of putting in a fixed price for an item and charging duty on it. So if it is fixed at 100, then your actual cost may be 60 or 80 or 120, you will have to pay duty on 100.

    In Delhi it happened quite recently on one product that is sold in the industrial market. Made of brass, these importers were invoicing at 10% of the actual valuie. Now the cost of brass is about 300 per kg which means one 20ft container having about 18-20 tons of material should cost 54-60 lacs. Now if that is billed at about 6 Lacs then that is not even defend-able. You can pay the customs officers bribe and keep going but then your luck runs out when DRI gets involved. They screwed those importers bad and the customs guys then fixed a price for those items.

    I heard that in Mumbai a similar thing exists on building materials like door closers and hinges etc.

    But since thousands of items are being imported, it think it is difficult to track and put a price on every one of it.
     
  21. Tianshan

    Tianshan Regular Member

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    and in response, china will increase import duties in anything from india.

    back to square one, except that the level of trade and profit for both sides has been reduced.
     

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