Effects of Dumping on Indian Industries and Need for Anti-Dumping Duties on Chinese Goods

This report aims to throw a light on the effects of dumping on the Indian industries and evaluate the needs to impose anti-dumping duties by the Indian government on imported Chinese goods. The first part of the report intends to explain the trade relation between India and China and the major impact dumping has on Indian textile industry. The second part of the report deals with the meaning of anti-dumping duties, impact of dumping on globalisation, economy, regional integration and competition and effects of dumping on various Indian industries. The main aim of the report is to justify the reasons for imposing anti-dumping duty on Chinese goods and making a case addressing the Chinese embassy.

Running head: TRADE BETWEEN INDIA AND CHINA
Trade between India and China
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Author Note

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Executive Summary
This report aims to throw a light on the effects of dumping on the Indian industries and
evaluate the needs to impose anti-dumping duties by the Indian government on imported
Chinese goods. The first part of the report intends to explain the trade relation between India
and China and the major impact dumping has on Indian textile industry. The second part of
the report deals with the meaning of anti-dumping duties, impact of dumping on
globalisation, economy, regional integration and competition and effects of dumping on
various Indian industries. The main aim of the report is to justify the reasons for imposing
anti-dumping duty on Chinese goods and making a case addressing the Chinese embassy.

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Table of Contents
Part 1..........................................................................................................................................3
Part 2..........................................................................................................................................4
Introduction................................................................................................................................4
Impact on Globalisation.............................................................................................................4
Impact on economy....................................................................................................................5
Impact on competition................................................................................................................6
Impact on regional integration...................................................................................................6
Impact of dumping on various Indian industries........................................................................6
Solar industry.........................................................................................................................6
Textile industry......................................................................................................................7
Pharmaceutical industry.........................................................................................................7
Firecracker industry...............................................................................................................7
Impact on steel industry.........................................................................................................8
Conclusion..................................................................................................................................8

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Part 1
In the recent times, it is evident that the Chinese market has captured a huge part of
the market of various parts of the world. The major cause behind China’s success in this
process is due to distribution of low quality products at cheap prices to various countries
including India. This puts a negative impact on the Indian economy and the Indian export
market. To protect the local markets of India, the government has imposed anti-dumping
duties on the Chinese products.
Focusing on the textile industry, China’s export of cheap textile products has led to
closure of 35% of power looms in Bhiwandi and Surat in India (Waghmare and Chakraborty,
2018). According to the textile industry officials, China exports raw materials of textile to
India via Bangladesh, which possess a free trade agreement with India. This gives the
Chinese market access to $100 billion textile market of India. India, in August 2018,
increased the import tax to 20% on more than 300 textile goods. This was aimed at protecting
the Indian domestic textile market from the threat of cheap products exported by China.

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Part 2
Introduction
Anti-dumping duty is a tariff imposed on foreign countries to protect the local
markets and businesses from being exploited by the nations, which export products at a price
below the fair market value (Chandra and Long 2013). Dumping relates to a process where
companies export goods at a monetary value lower than the domestic price (Blonigen and
Prusa 2016). To protect the businesses within the domestic nation, many countries impose
duties on goods that are dumped in the domestic market. Most of the products found in the
Indian market ranging from toys to textile products, crackers, electronic goods and house
hold products, are imported by China. Usually these products are of low quality and much
cheaper than the products in the Indian market. The price charged by China for the Chinese
product are 10 to 70% lower than the Indian goods (Blonigen and Prusa 2016). Over the
years, China has captured a huge market of various industries in India by dumping their
products at a low price in the Indian market resulting to a downfall in the domestic markets of
the country. The effect has been massive since the export market of India has also got
affected along with the domestic businesses. This report deals in bringing the issue to the
notice of the Chinese embassy to make a case for anti-dumping duties by an Indian trade
diplomat.
Impact on Globalisation
Due to dumping of low standard goods in India by the Chinese industries, the global
business of India also gets affected. According to a Government committee in India, imports
by the Chinese industry is causing unemployment in India, which affects the global business
of the nation and creating an obstacle in the economic growth (Srivastava 2014). The Indian
trade is skewed due to the imported Chinese goods. Any withdrawal in putting restriction on

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the import of Chinese products in India is expected to deteriorate the condition of the Indian
market. Presently India imports $22 million low quality information technology products and
electronics appliances for its own sector of electronics and power (Taunk and Kumar 2014).
Since the condition of various Indian industries is going down, the local markets of India is
not in a position to supply products to the rising telecom and power sector. This situation
pressurizes India to import such necessary goods from United States and European countries
at a prohibitive cost, which results to an additional financial burden on the two sectors. Thus
imposing anti- dumping duties on the Chinese goods is a necessary action that must be taken
by the Indian government to enable smooth flow of trade with China and other countries.
Impact on economy
Dumping of Chinese products of low standard eats up the market share of India
reducing the competencies of the Indian industries. It has a huge negative impact on the
economy of India since a long time. Dumping affects the financial indicators like output, cash
flow, profit, inventories and wages, utilization of capacities, return on investment,
employment and sales (Bendini and Barone 2014). The economy of India gets affected due to
the negative impact on the domestic industries and sectors. Since the Chinese products are
sold at a low price in the Indian market, it creates a temptation within the Indians to go for the
low priced product, which ultimately leads to decline in the revenues of domestic market.
Indian industries like iron and steel, aluminium, textile, pharmaceuticals, solar, firecrackers,
toys and electronics face a severe loss due the dumping activities of China, which reduces
and distorts the economy of the nation as a whole (Bendini and Barone 2014). Due to the
availability of low priced goods in the market, growth of the manufacturing sector of the
nation has hampered which leads to poor quality of products. Small-scale industry is the
sector that suffers the most due to the Chine products imported to India since it contributes 35
to 40% of India’s total manufacturing due to which many Indian workers lost their jobs and

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the objective of the small-scale industry to remove poverty from the rural areas and providing
jobs to the rural youth has remained unattained (Srivastava 2014).
Impact on competition
Anti-dumping duty is considered as a technique of improving the competitive position
of the country imposing anti-dumping duty against competitors from foreign countries (Sun
and Whalley 2016). Imposing anti dumping duty is necessary to protect the domestic market.
When China dumps their products in India with an intention to remove the foreign
competitors, India initially gets the benefit of cheap products but when the commodity is sold
at a high monopoly price, India incurs loss since it has to sell the good at a high price.
Impact on regional integration
Dumping of low quality Chinese products in India reflects the regional integration of
India to a great extent. The closure of certain Indian industries disrupts the integration of the
industries in the nation. This issue arises due to the interconnection of the industries within
the nation. Downfall in market share or revue directly affects the other industries that are
inter linked. Reports have presented that the dumped commodities of China is undercutting
the prices that prevail in India, which has led to decline of Indian industry’s profits, cash
profits and return on capital since 2016 to 2017 (Commerce.gov.in 2018).
Impact of dumping on various Indian industries
Solar industry
India was considered as one of the major solar product exporters between 2006 and
2011 before dumping of products by the Chinese industries started taking place. 84% of the
solar requirements of National Solar Mission constitutes imported solar panels form China.
According to a parliamentary panel, India lost 200000 jobs due to China’s dumping of solar
panel. The impact of dumping of Chinese solar panels would be extreme due to the threat of

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partial or complete closure of domestic solar industries. Imposing of a tariff or Rs. 2.50 to Rs.
2 per unit on solar power has a great potential to increase the economy of India. The Indian
solar industries need to bring innovations in the industries to reduce price per unit. Levying
anti-dumping duties on Chinese Solar panels will facilitate level pegging for the domestic
solar industry of India.
Textile industry
The Standing Committee on Commerce stated that the existing Goods and Services
Tax of 18% on synthetic fibres has increased the imports of fabrics from China (Dasgupta
and Roy 2015). Further, free trade agreements (FTAs) exist between India and least
developed country like Bangladesh. Garments are manufactured from Chinese fabrics in
Bangladesh, which are imported to India at a cheap rate, which leads to shut down of various
textile industries resulting to unemployment (Raichurkar and Ramachandran 2015).
Pharmaceutical industry
The pharmaceutical industry of India largely depends on China for its raw materials.
It has 90% dependence on the China for products like life-saving drugs. The import of low
priced drugs in bulk from China has was around $2 billion dollar in 2014 to 2015, which led
to serious disruption in the production of life saving drugs.
Firecracker industry
According to the Standing Committee on Commerce, firecrackers exported by China
to India contains high level of an explosive chemical, potassium chlorate, which is banned in
India. Low priced Chines crackers unusually contain chemicals, which are harmful for human
health as well as environment. Indian firecracker industry faces a huge threat due to the
imported Chinese firecrackers. In 2014, around 35% of the crackers produced by Indian
industry remained unsold due to import of several containers of Chinese crackers. The
estimated value of imported Chinese firecrackers is nearly Rs. 600 crore for 2000 containers.

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Impact on steel industry
Official data represents that steel supply from China has increased to 362000 tonnes
in April 2018 to June 2018 from 217000 tonnes in the previous quarter (Levien 2013). This
had a huge impact on the domestic market of steel as the both the primary as well as
secondary steel market saw a decline in the rate of capacity utilization. India is expected to
impose anti-dumping duty of up to USD 181.51 per tonnes for five year on several Chinese
steels with an attempt to protect the domestic industry of steel from cheap imported Chinese
steels (Levien 2013). According to The Directorate General of Trade Remedies (DGTR) the
imposition of anti-dumping duties will have an effect on the price levels of goods in India
(Udyawar 2018). However, competition will not get affected due to the imposition of the
trade remedial measures.
Taking into account the above issues related to dumping by the Chinese industries in
India and its impacts on various Indian industries, India would certainly impose anti-dumping
duties on the imported Chinese commodities to protect its domestic markets.
Conclusion
From the above discussion, it can be concluded that Indian industries faces a huge
threat from the Chinese commodities that are dumped into the Indian market at a low price.
The dumping of cheap quality products by China has led to decreased market share and
revenue and shut down of various industries though out the nation resulting to loss of job and
unemployment. Adopting anti-dumping measures would help the affected industries to
recover from the losses incurred.

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References
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