Indian MSMEs Struggle as Chinese Goods Dominate Market: GTRI Report
The dominance of Chinese imports is displacing local production, as over 90 per cent of the umbrellas, artificial flowers, and human hair articles used in India are sourced from China.
Indian small businesses operating in various product categories such as umbrellas, glassware, cutlery, handbags, and cosmetics are facing stiff competition in the domestic market due to the influx of Chinese goods, according to a report by the think tank Global Trade Research Initiative (GTRI) on Sunday.
The dominance of Chinese imports is displacing local production, as over 90 per cent of the umbrellas, artificial flowers, and human hair articles used in India are sourced from China. In product categories such as glassware, leather, and toys, China’s share in India’s total market for these items has increased to over 50 per cent, the report said.
“China supplies 95.8 per cent of India’s umbrellas and sun umbrellas ($31 million) and 91.9 per cent of artificial flowers and human hair articles ($14 million). China’s share in glassware has reached 59.7 per cent, handbags 54.3 per cent, and toys 52.5 per cent, reflecting a similar trend,” the report noted.
Even in categories such as ceramic products ($232.4 million, 51.4 per cent) and musical instruments ($15.7 million, 51.2 per cent), where Indian artisans once thrived, the dominance of Chinese imports is displacing local production, GTRI observed.
“Chinese imports are making a noticeable impact on MSMEs producing paper and paperboard products ($371.5 million, 24.7 per cent), essential oils and cosmetics ($160.8 million, 24 per cent), and edible preparations ($22.2 million, 21.6 per cent). These industries are witnessing reduced market opportunities as Chinese imports become more prevalent,” the report stated.
The think tank stated that “heavy reliance” on Chinese imports is eroding the market share and survival of Indian MSMEs. GTRI highlighted that trade deficits in natural resources like crude oil and coal are less concerning, but the growing dependence on imported industrial goods threatens India’s economic sovereignty.
The report also indicated that India’s industrial goods imports from China are rising. 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. The report highlighted that about 98.5 per cent of imports from China, or $49.6 billion, are industrial goods. China accounts for 29.8 per cent of India’s industrial goods imports and is the top supplier in all eight industrial goods categories, the report said.
Furthermore, the report mentioned that between January and June 2024, India’s trade deficit increased with 12 of the 23 countries compared to the same period in 2023. The countries with a rise in trade deficit and the corresponding percentage increases are China (10 per cent), Russia (10.5 per cent), Iraq (23.4 per cent), Indonesia (65.9 per cent), and the UAE (31.6 per cent).
Earlier, the Economic Survey pointed out that India faces two choices to benefit from the “China plus one” strategy: it can integrate into China’s supply chain or promote Foreign Direct Investment (FDI) from China. Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies have done in the past, the survey said.
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