IMPACT OF CHINESE GOODS ON INDIAN MARKET

Document Sample
IMPACT OF CHINESE GOODS ON INDIAN MARKET Powered By Docstoc
					IMPACT OF CHINESE GOODS
   ON INDIAN MARKET
                          INDEX

Acknowledgement                             3

Made in China, sold in India                4

There seems to be no way to escape the 5
DRAGON!!!


Case study – Indian BPO Industry            6

Case study – Tit-for-tat over dairy ban     9

Why are chinese products priced so cheap?   9


Chinese goods: boon or bane ?               12
                                 ACKNOWLEDGEMENT

We would sincerely like to thank Prof. Sharmishta Bose for providing us an opportunity to
explore such wonderful topic and broaden our knowledge. It would have not been possible to
learn this topic without ma’am supporting us.
Introduction

MADE IN CHINA the label has caused a sense of fear and anxiety among the Indian
business houses. China opening up and operating on socialist market economy principles is a
tough and competitive China; a dragon which is all set to sweep the world markets with its
various goods, goods which are of good quality and are surprisingly priced at a low rate,
which is something that baffles the world community.

The low rate comes due to the fact that the Chinese Government lends a subsidy ranging from
30 per cent to 100 per cent. The Chinese made goods, of better quality and low rate, have
flooded the Indian market in hordes encompassing all types of products – chocolates, toys,
garments, computer hardware, and so on, and are finding ready and eager takers among the
Indian consumers and this is the factor which has caused a great sense of uneasiness among
the Indian industry community.


Ten years ago, it was unthinkable to compare China with India. The emergence of India and
China as major global players heralds new realities. Both countries have transformed the
global political architecture increasingly shifting power from West to the East. The question
issue here is the nature of the India's economic growth and its potentials to outperform
China.

To-day India has become the world's most debating chamber before economists and
entrepreneurs like you, it is not without a reason – it is an exiting love-affair with growing
passion which reminds us all that rise of India means that democracy can be good for growth.
It also poses a question that can an Indian political model based on democracy and rule of
law can overtake rival Chinese political model of unbridled government authority as a
formula for making poor countries rich.

India's economic dynamism constitutes a huge paradox comprising achievements and
failures simultaneously. Economic reforms in India over the last few years in particular are
promising but not sufficient. India may claim that there is no other country in the world
which is so productive and that India's pluralistic system is in fact strength rather than a
weakness, it is not too convincing given the slow pace of development. India may claim that
because of the democratic system it has fallen behind China in terms of both FDI and growth
rates, but in fact a lot of problems being experienced in India are not because of democracy
but because of bureaucracy, controls and restraints in establishing enterprise and barriers in
the way of entrepreneurship and lack of effective governance.

Two years ago the view that India might have a more competitive economy than China was
met with incredulity. To-day comparison of the two countries offers valuable insights for us
for the global economy. A fundamental distinction is that China's growth stems from resource
accumulation while India's is rooted in increasing efficiency.

In the last decade, India has emerged next to China in their growth rate. Empowered by
engine from IT, and exporting its manpower throughout the world that has increased the
credibility of India, and made it an economic powerhouse for the 21st Century; and it has
shown that it has all the guts to be in that ceremonious position.
Made in China, Sold in India


With the world turning into a global village and competition getting stiff, countries like China
are ruling the roost in many a market in varied spheres. India is the hub of diverse business
opportunities, and slowly yet steadily, Chinese products like electronics, crackers, idols,
apparels, etc. are predominating similar Indian products.
The festive season is the season of business especially filling the pockets of traders. But
instead of the domestic sector holding sway over the market, the opportunities are grabbed by
Chinese manufacturers with their variety of exquisite products. Whether it is SMEs ( Small
and Medium Enterprises) or cottage industries, they are not able to provide a stiff competition
to the cost effective offers provided by the Chinese. Due to these relentless import of Chinese
products, most Indian cottage industries have closed down, and the future of the existing ones
looks very bleak.
The Chinese entrepreneurs have infiltrated the market in a very systematic manner with their
well-planned marketing strategies and continuous innovations. They study the demand
patterns and the market trends and work out the lowest price that they can offer to attract a
huge section of the consumers while still maintaining a profitable margin. As the Indian
market is price-oriented, the domestic players are slowly losing their share to the strategic
Chinese entrepreneurs.
Chinese electronic goods like radio, torch, DVD players, etc. are reigning supreme in the
Indian market. Decorative items, fashion accessories like slippers, jewelleries, hand bags, etc.
receive huge responses during festive seasons. This year, one saw the flooding of the Indian
markets with Chinese made idols which were welcomed with open arms by the Indian
consumers.
Commenting on the change of the market scenario, Mr. S.P Agarwal, President of Delhi
Exporters Association, said, "Chinese manufacturers have created a big problem for the
Indian manufacturers. Especially the cottage sector which produces goods like handicrafts,
decorative items, gift articles, idols etc. has been drastically affected, by the dominance of
Chinese products in the market. This has raised a question mark against the various
marketing policies that the Indian Government is making."
There seems to be no way to escape the DRAGON!!!

Yes, the Chinese goods have invaded almost all the sectors of Indian market and seem to be
bringing tougher times for the Indian Industry. The rise in demand and sudden popularity of
Chinese products, which are available at cheaper prices, is giving nightmares to the Indian
industry to the extent that they have started sticking “Made in China” stickers on their
products to boost their sales.

Chinese manufacturing units produce goods on a large scale. They are using the big Indian
market merely to dump their products and by doing so they are killing the Indian units. For
example last year during Diwali, China made crackers were sold in the Indian market. These
crackers reportedly contained Sulphur. Sulphur is more harmful than Nitrate, which is used
in India to make crackers. Since the Chinese crackers were cheaper than the Indian crackers,
so they managed to attract gullible and largely illiterate Indian lot. As a result the Indian
cracker industry saw a decline in the revenue.

China is our major competitor in sectors like software, hardware, electronics etc. We should
not allow China to dump their excess produce here. The small-scale industry (SSI)
contributes 35-40 per cent to the total manufacturing in India. So it is the SSI, which suffers
most because of Chinese goods. Many small-scale Indian companies have stopped
manufacturing their own goods as now they import them from China. That’s why many
Indian workers have lost their jobs.

It is the high time that our political leaders change their mindset and bring about the right
kind of reforms without losing precious time in endless discussions. We must take necessary
steps so that we do not fall prey to the DRAGON’s designs of capturing a major share of our
growth, which could prove to be a setback for our economy in the future.
Everytime You Buy A Product...




...make sure that you are not buying a product 'Made In China'. Many may wonder why one
should not buy an affordable and attractive Chinese product which is easily available in any
Indian shop. The reasons are many:

'One-hour technology' products from China started entering Indian households some years
ago. Even though the majority of these products did not succeed in the Indian market due to
their 'inferior' quality, the Chinese 'invasion' of our market is still continuing. The dumping of
Chinese-made fans, locks, watches, bicycles, radios, batteries etc is slowly replacing our own
products and has become a threat to Indian industry. China herself is one of the victims of the
counterfeit products they produce; in the year 2001, fake and low-quality medicines produced
in China killed about 192,000 people.

The Indian toy industry has been more or less wiped out due to the dumping of cheap
Chinese toys.

'Made In China' can be classified into three categories: 1. Products Made in Forced Labour
Camps 2. Products Manufactured by the Chinese Military 3. Products Manufactured by the
Disenfranchised Labour Force.

Business is everything! In 1998, the New York police busted a racket of some senior Chinese
officials involved in the sale of the organs of executed prisoners for transplantation. It is
estimated that more than one crore people work in thousands of forced labour camps across
China. This includes a big majority of 'political' prisoners. China tops the world with more
than 2,300 executions per year. Most of the executions take place in front of crowds inside
sports stadiums or public squares in the most preferred way -- 'a bullet to the back of the
head,' because it does not contaminate the prisoners' organs with poisonous chemicals, as
lethal injections do. Remember that every time you buy a product 'Made In China,' you are
funding and empowering a brutal regime. We request you to boycott Chinese goods to save
and protect the Indian industry and also to help end injustice and oppression in Tibet. Spread
the word. Take a pledge that you will not buy, use or sell any product 'Made in China'.
Case Study

The Indian BPO industry has grown at a mind-boggling 60–70 percent annually, with
revenues rising from US$565 million in 1999–2000 to more than $3.4 billion now - China's
was only a fraction of it - $210 million.

With huge investments flowing into China and with robust domestic demand, it's a paradox
of plenty as far as China is concerned. The higher you go, the harder you will fall. Policy
makers in China seem to understand this well as they have taken deliberate measures to
slowdown the surging economy.
India is better placed than China for future growth. Its capital markets operate with greater
efficiency. They are also much more transparent. Companies can raise the money they need.
India's legal system, while too slow, is much more advanced and is able to settle sophisticated
and complex cases. Its banking system has relatively few nonperforming assets.

India's democracy and news media are alive and vital, which provides a safety valve for the
incoherent changes that modern economic growth brings. India has religious riots,
secessionist movements, urban squalor and bitter rural poverty. But the voters know they can
throw the rascals out, and they regularly do.

For decades China has benefited from the wealth and the investment potential of its Diaspora
and the economic energy of Hong Kong and Taiwan. After years of ignoring its Diaspora,
India is now welcoming them back - and they have much more "intellectual capital" to offer
than China's. The remittance inflow from overseas Indians during 2005 was more than 21
billion dollar, much more than Chinese Diaspora has remitted.

India seems all set to outperform China in the next 20 years. But, hopefully, the biggest
beneficiary of the rise of India will be China itself. It will be forced to examine the
imperfections of its own economic model and to abandon its sense of complacency acquired
in the 1990s. China was years ahead of India in economic liberalisation. Today it lags behind
in critical aspects, such as reform that would permit more foreign investment and domestic
private entry in the financial sector.
In the long run, India will overtake China in economic growth owing to home-grown
entrepreneurship, stronger infrastructure to support private enterprise and companies which
compete internationally with global firms, a media report has claimed.

The real issue is not where China and India are today but where they will be tomorrow. The
answer will be determined in large measure by how well both countries utilize their
resources, and on this score, India seems to be doing a better job.

India has also developed much stronger infrastructure to support private enterprise. Its capital
markets operate with greater efficiency and transparency. Its legal system, while not without
substantial flaws, is considerably more advanced

The international system is changing towards an age where human and trade union rights will
be an important currency of power. Military and economic might alone would not do.
Although China has 450 million people in its globalize economy compared to India's 250
million, the participation of Chinese workers in the economic progress is limited only to
"production" without any rights. Chinese workers are denied their basic trade union rights.
China does not respect internationally recognized core labour standards.

India finds its strength in democracy whereas China believes in imposing laws. In fact, to
those who doubt the universal application of democracy and its economic virtues, I say that in
spite of India's sizeable challenges it faces, it is a remarkable example of what democracy can
achieve. Lastly, in my view one of the important reasons for India having an edge over China
is the lack of democracy and one party rule in China.
Case study

China warns of tit-for-tat over dairy ban!

China has retaliated against India's ban on its dairy products, putting the two neighbours with
a legacy of estrangement on the brink of a trade war.
China is annoyed with India's decision to extend the ban on its milk and milk products, which
expired on June 24, by another six months until December 24. It has threatened to ban Indian
products in retaliation.
In a letter to the Indian embassy, general administration of quality control bureau of China
said, "During the period of financial crisis, we are strongly against trade protectionism of any
form. As a member of BRIC and WTO, we hope your party determines the prohibition
towards China's dairy products ASAP, in the spirit of safeguarding bilateral trade." It added,
"If India insists on this decision, China will respond to the safety and quality of imported
products from India."
According to commerce ministry officials, China has raised doubts about food products
imported from India, including seafood products, dairy products and sesame oil to pressurise
India to lift the ban. "China has also taken a moral high ground by saying that it has not
banned import of these Indian products," an official said.
Arguing for lifting the ban, China pointed out that after the milk scandal, it had taken several
measures to deal with the problem and highlighted that these measures prompted countries
like Singapore, Malaysia, Thailand and Chile to lift the ban on Chinese dairy products.
China has asked India to provide the scientific basis and risk assessment under the WTO/SPS
agreement to enforce the ban on its products.
"The Chinese side shows grave concern because the ban is extended in India while it is
removed in other countries. The reaction in India, regardless of the efforts and achievements
by Chinese government, differ from good cooperation between both sides, lacking scientific
ground and against scientific principle, the transparency principle and the minimum impact
on foreign trade principle stipulated in WTO agreements," the letter said.
The ban on dairy products was extended for six months to ward off any threat of
contaminated whitener which had caused deaths of several infants and made several
thousands ill. A notification to this effect was issued by the Directorate General of Foreign
Trade (DGFT).
India, in September 2008, had banned Chinese milk and its byproducts for three months
which was later extended in December last year for six months. Melamine, used to make
plastics and fertilisers, was found in infant milk and other dairy products of several Chinese
firms. The dangerous chemical can cause kidney stones as well as failure of the organ.
More than a dozen countries in Asia and Africa had also banned milk and dairy product
imports from China, while several others had recalled products suspected to be
contaminated.
Why are the Chinese goods priced so cheap?

The cost of production being less in China is an obvious answer but when we dwell deeper
into the world of Chinese manufacturing, the reasons abound. Chinese goods are known for
their moderate quality, prompt delivery and affordable prices in comparison to Indian goods.

Following are some of the reasons behind Chinese goods being cheaper than Indian goods:

 1. China does not have stringent intellectual property rights (IPR) issues so come any new
     product in the world market; China is ready with a cheaper alternate. Thus there is no
     cost of research, designing and redesigning of any product.
 2. The labor is not demanding and does not go on strike.
 3. Where most Indian companies are striving for a Total Process Review (TPR) for quality
     satisfaction, Chinese companies are not so particular.
 4. China does not have any after sales tax on its products leading to a further lowering of
     costs.
 5. The cheap Chinese labor is another major reason for the dirt cheap Chinese goods
     especially like toys where intensive labor techniques are employed.
 6. Lower rate of Indirect taxes on Inputs.
 7. High level of cash subsidies being offered by the Chinese government to its producers
     and exporters.
 8. Lower taxes enable the Chinese companies to participate in the world market at a lower
     margin and thus dominate it. Adopt the business model focused on higher volumes is a
     natural progression in this scenario.
Chinese goods: Boon or bane?


The recent flooding of Chinese goods into the Indian market has raised a hue and cry, and the
question whether we should accept this silently. From the narrow viewpoint of the average
consumer, sufficiently satisfactory quality goods are available at roc k-bottom prices. For
instance, the prices of China-made compact fluorescent lamps are less than the prices of
lamps of well-established Indian brands, and of comparable quality.

Now the Indian consumer is smart enough. There are issues of low quality Chinese products,
It all depends on whatever the importer wants to import from China. They ask them to
produce low cost products, which China produces for its buyers in India. The same country
(China) is also supplying to US market where the consumer is quite quality conscious. So it
depends on the buyers' demands. If the Indian buyers are asking for cheap products than
China is producing these products for them."
"In China the same kind of pen can be bought in $10 and also for $1. If you say I would like
to buy the pen of $1, accordingly he will use materials different from what he uses in the $ 10
pen," he added.

If experts are to be believed, almost all organized retailers are reporting a growth in Chinese
imports. According to sources, in a global economy, it is inevitable that Indian products will
find markets abroad and foreign goods will be sold in India. But the million-dollar question
is: Why would Indians go to China if Indian manufacturers can give them the same or better
product quality, much safer, more variety and price?

There are some experts who are of the opinion that competitive products from China and
other countries are benefiting Indian consumers and therefore India Inc. should have no
objection to it. Point to be noted here is that only top quality Chinese products are gaining
market share in India, not the shoddy ones. It is worth mentioning in this regard that Chinese
consumer electronics are not selling in India.

It's a good possibility that in the next two or three years, some Indian industries will succumb
to competition from imported goods, but large chunk of Indian manufacturers will pull up
their socks and compete hard. No one will argue with the fact that organized retail has started
a process of discovery for Indian manufacturers. As a matter of fact, they are finding their
own strengths. In addition, they are preparing to give a fitting response to imported goods.
In theory, Chinese products are winning only in categories where Indian industry has failed to
provide top quality products at competitive prices. India needs to step up and start promoting
India products as a sfaer alternative to China. All in all, one can safely say that Indian
manufacturers will have to shape up; or they will get edged out of their home market in few
product categories.
GROUP MEMBERS-

Akshika Ladhani – 3

Saket Nandwani –

Ankita Patel – 20

Devanshi Ptael –

Kunal Sharma –

Hiral Soni – 45

Fatema Tinwala – 51

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:1014
posted:4/30/2011
language:English
pages:17