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Localisation of over 600 items to cut trade deficit with China by $10 billion; lamps, furniture may see duty hike

FISME carried out the analysis following a directive from the Commerce Ministry to ascertain products where import dependence could be substantially reduced

Nirbhay Kumar | July 14, 2020 | Updated 14:53 IST
Localisation of over 600 items to cut trade deficit with China by $10 billion; lamps, furniture may see duty hike
The Commerce Ministry had last month asked several industry bodies including CII, FICCI, and Assocham to give their inputs on a number of goods imported from China

KEY HIGHLIGHTS

  • Industry body FISME has identified over 600 items which could be produced locally to reduce import dependence from China
  • By building local capability to produce these items, India can cut its trade deficit with China by about $10 billion a year
  • Commerce Ministry is considering various levers to tighten screws around China - they include both tariff and non-tariff measures  
  • A section of the industry is, however, against knee-jerk reaction which would hurt Indian consumers and manufacturers

As many as 666 items such as electric lamps, wooden furniture, tricycles and ski-boots imported from China could be produced locally and hence cut trade deficit with the neighbouring country by about $10 billion a year, industry body Federation of Indian Micro and Small & Medium Enterprises (FISME) has found.

FISME carried out the analysis following a directive from the Commerce Ministry to ascertain products where import dependence could be substantially reduced.

"We have identified over 600 items which are imported by MSMEs primarily from China. We are in the process of assessing the impact of higher duty on these items. In some cases, for instance low-value items, local capability can be easily built and import substitution can happen. We are studying it in detail and send our recommendations to the government," said FISME Secretary General Anil Bhardwaj.

Most of these products are those which do not require much technical skill to manufacture locally. They would also not result in any significant cost escalation for local firms. The industry body, however, wants thorough study and examination before higher duty is slapped on these products or trade barriers erected.

The Commerce Ministry had last month asked several industry bodies including CII, FICCI, and Assocham to give their inputs on a number of goods imported from China. The move was aimed at tightening the screw on China by raising import duty on various items while restricting the flow of a slew of other items.

"We are looking at strengthening Indian manufacturing. Manufacturing is strengthened by incentives, by cutting down on unnecessary imports. There are non-competitive imports where Indian industry is not strong. We are looking into these issues and trying to take action. There are tariff measures, non-tariff measures and many other measures to promote local industry," a senior Commerce Ministry official said.

Following the tensions on Line of Actual Control (LAC), popular sentiment against China has grown strong and industry view has largely been in line with it. Large corporates such as JSW Group have announced their plans to cut imports from China to zero.

But many companies, especially MSME manufacturers, favour a gradual plan to substitute imports from China and want the government to first provide alternative competitive sources for raw materials and other key inputs. They fear that sudden restriction on import of raw materials could make sourcing costlier by 10-40% and hence lead to increase in prices of final products. This will hurt both consumers and demand.

"Chorus of protests to stop import from China as a retaliation to their misdeeds on the border and from other countries by way of raising tariffs or through NTBs (non-tariff barriers) to achieve the dream of Atma Nirbhar Bharat, is music to Corporate and also fun for the downstream manufacturers of intermediate and final goods meant for end users," says VK Aggarwal, Managing Director of Shashi Cables, a Lucknow-based medium enterprise.

"Competition is one aspect of business that everyone hates. Its absence is like breathing in fresh or living in peace for any manufacturer!" he added.

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