How Indians are rejecting cheap Chinese goods
Despite complex trade relations between India and China, people have started buying more Made-in-India goods during festive season. PM Modi referred to the completion of a decade of the ‘Make in India’ initiative where all segments, from big industries to small shopkeepers have made a contribution to its success. This has started to reflect in festive sales.
On Rakhi festival this year, The Confederation of All India Traders (CAIT) stated that customers preferred indigenous Rakhis over Chinese ones. “For several years now, only indigenous Rakhis have been sold in the country, and this year too, there was neither demand for nor any presence of Chinese Rakhis in the market,” the CAIT said in a note.
Last Diwali, Made-in-India decorative lights gave competition to Chinese products that dominated the market for the past several years. According to dealers, Chinese products had been popular because of innovation and low cost compared to Indian products. Though a variety of imported Chinese lights flooded the market last Diwali, many customers were buying Indian decorative lights as they are more durable and require less maintenance. The pipe light strings, battery-operated diya light, LED light chandeliers, flower light, special golden light for temple decoration and LED ‘kalash’ light were some of the popular items. “Reputed Indian companies too have launched fancy lights fashioned like the Chinese variants and though they are expensive, people are buying them as they last longer,” a trader had told TOI last year.
Retail markets across India registered a record trade of Rs 3.75 lakh crore during Diwali season last year, traders’ body CAIT had said. CAIT Secretary General Praveen Khandelwal said Chinese goods lost a trade worth more than Rs 1 lakh crore during the Diwali festive season. “In previous years, Chinese products were occupying nearly 70 per cent market of Diwali festivals. However, this year, appeal of Prime Minister Narendra Modi to make this Diwali vocal for local has gone down well and widely accepted and implemented by both traders and consumers,” he said.
India’s narrowing trade deficit with China
India has recorded trade surplus with 151 countries such as the US and Netherlands, while the country has a trade deficit with 75 nations, biggest among whom is China, as per think tank Global Trade Research Initiative (GTRI)
At the World Trade Organization (WTO) Trade Policy Review of China in July, India raised concern over its large trade deficit with China and the non-transparent subsidies and mechanisms followed by the latter, which it said lead to low prices and hurt the local industry.
In 2023-24, India’s exports to China amounted to $16.65 billion while imports totalled $101.75 billion, leaving a trade deficit of $85.08 billion, higher than $83.19 billion in 2022. China emerged as India’s largest trading partner in FY24 with $118.4 billion two-way commerce, narrowly edging past the US, which was the top trading partner of India during 2021-22 and 2022-23. According to the Commerce Ministry data, China was India’s top trading partner from 2013-14 till 2017-18 and also in 2020-21. Before China, the UAE was the country’s largest trading partner.
India has the highest trade deficit with China in goods but the gap expanded at a lower pace during 2014-15 to 2023-24 as compared to the previous 10 years, Commerce and Industry Minister Piyush Goyal said in July. In a written reply to a question in the Rajya Sabha, the minister said that the trade deficit has increased by compound annual growth rate (CAGR) of 42.85 per cent during 2004-05 to 2013-14, while the same has come down to 6.45 per cent during 2014-15 to 2023-24 which clearly indicates the success of the government in containing rate of growth of excessive import growth from China during the past 10 years.
From 2004-05 to 2013-14, trade deficit grew by approximately 24.8 times while it grew only by 1.75 times from 2014-15 to 2023-24, he said.
While 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, India’s main dependence on China is for capital and intermediate goods demand for which has risen due to a spurt in domestic manufacturing of finished goods.
Most of the goods India imports from China are capital and intermediate goods and raw materials like Active Pharmaceutical Ingredients, auto components, electronic parts and assemblies and mobile phone parts. These are used for making finished products which are also exported out of India. As sectors such as electronics, pharma, telecom and power expand and the government encourages local manufacturing of finished goods, the demand for Chinese intermediate goods and raw materials does not slacken much. India can cut down its reliance on Chinese imports as Indian manufacturing deepens further and the country builds a whole manufacturing ecosystem including capital and intermediate goods and raw materials.
(With inputs from agencies)