According to the think tank — Global Trade Research Initiative (GTRI) — many of the imported products are also made by local MSMEs, and they find it hard to grow due to the easy access to low-cost Chinese products. In a detailed study done by GTRI, it has been revealed that local MSMEs are finding it difficult to compete with cheap Chinese imports in product categories like umbrellas, artificial flowers, human hair articles, leather articles and toys.
For example, China supplies 96% of India’s umbrellas and sun umbrellas ($31 million) and 92% of artificial flowers and human hair articles ($14 million). Chinese imports have captured 60% of the glassware market, 54% market of leather articles including saddlery and 52.5% of toys market. The Chinese dominance in the Indian toys market is despite the government hiking customs duty on toys from 20% to 70% and implementing quality control measures.
“Even in ceramic products ($232.4 million, 51.4%) and musical instruments ($15.7 million, 51.2%), where Indian artisans once thrived, the dominance of Chinese imports is displacing local production,” says the GTRI research.
In product categories, where Chinese imports account for less than 50% of domestic market, Indian MSMEs are struggling to compete in industries such as furniture, bedding, and lamps (with Chinese supplies capturing 48.7% of market with imports valued at $370.8 million), and tools, implements, and cutlery (39.4%, $269.3 million). “These are sectors where Indian small businesses have traditionally been strong but are now losing ground due to the influx of Chinese goods,” observes GTRI.
Similarly, products like articles of stone, plaster, and cement (49.3%, $234.5 million), miscellaneous articles of base metal (47%, $282.6 million), and carpets (31.8%, $24.8 million) are under threat, diminishing the competitiveness of local producers. From January to June 2024, India exported $8.5 billion to China while importing $50.4 billion, resulting in a trade deficit of $41.9 billion. This low export and high import make China India’s largest trade deficit partner. About 98.5% of imports from China, or $49.6 billion, are industrial goods. China accounts for 29.8% of India’s industrial goods imports.
