Indian MSMEs face tough competition from cheap Chinese products

Sourced from Press Information Bureau 

Indian Micro, Small and Medium Enterprises (MSMEs) are facing tough competition from cheap Chinese products and it is evident from the high growth of India’s imports from China. As per information compiled from the data provided by Director General of Commercial Intelligence & Statistics, imports in respect of 11 major product groups, largely manufactured by MSMEs in India, have grown from China at a higher rate than their respective imports from all countries combined during 2012-13 to 2015-16. As these 11 product groups accounted for 74% of India’s total imports from China in 2015-16, a significant proportion of Indian MSMEs seem to be adversely affected from Chinese imports as compared to the rest of the World. These product groups pertain to Electrical and Electronics, Mechanical and Metallurgical products on the one hand and Chemical, Glass & Ceramics based products on the other.

Union Minister for MSME Kalraj Mishra, during his recent visit to China in October 2016, invited Chinese businesses to have partnership with Indian businesses including MSMEs for technological collaboration and manufacturing in India. FDI policy, places certain restrictions on foreign investment in certain sectors. Subject to such restrictions, foreign investors could setup enterprises in India without a lower level ceiling on investment. Such investment could be greenfield as well as brownfield in existing enterprises.

India has one of the most liberalised FDI policies in the world, wherein 100% FDI under automatic route is permitted in most of the sectors/activities. There is only a small list of sectors/activities where FDI is regulated i.e. subjected to government approval, cap or having other conditionalities. The FDI policy equally applies to MSME sector.