Indian exporters feel the heat of India-China tension

The FIEO on Thursday reiterated that the Customs authorities at several ports in India had ordered a sudden examination of Chinese consignments without any official word from the government, and this may have led to the Chinese retribution.

The Customs authorities in Hong Kong and China, in apparently a blow-for-blow measure, have held back some consignments of Indian exports after ports in India took up the task of inspecting Chinese products, the Federation of Indian Export Organisations (FIEO) has told the government.

The FIEO on Thursday reiterated that the Customs authorities at several ports in India had ordered a sudden examination of Chinese consignments without any official word from the government, and this may have led to the Chinese retribution.

“While we have been told there is no official communication, the examination is leading to the piling up of imports.

"Some Indian exporters have said that, in response to such action, Hong Kong and Chinese Customs are also holding back export consignments from India,” FIEO president Sharad Kumar Saraf told Commerce Secretary Anup Wadhawan in a letter reviewed by Business Standard.

The exporters’ body has requested the commerce department to ask the Central Board of Indirect Taxes and Customs to clarify things on the matter so that import partners in China and Hong Kong can end the logjam. Fears of retaliation have gripped the sector.

“China’s exports to India constitute 2.8 per cent of the country’s total. But what India sends China are 5.4 per cent of our exports,” FIEO director general Ajay Sahai said, arguing India’s larger trade exposure to China needed to be considered before New Delhi took unilateral moves.

In a press conference, the FIEO said exports were expected to contract by 10 per cent in 2020-21, and it was anticipated that June exports would shrink by 12 per cent, down from May’s high 36 per cent.

However, the estimates may worsen if the government pursues a blanket ban on Chinese imports, the FIEO warned.

“We need to take a calibrated approach to banning imports from China because our industry is dependent more on industrial inputs from China than on those from any other country.

"Rather than making a hasty reaction, we have instead suggested to the Directorate General of Foreign Trade that exports of raw materials to China be tightened and a cess can be considered,” said Saraf.

He flagged the issue of lost revenue by pointing to cotton exports to China, where the commodity is made into high-value garments, shipments of Indian spice sold at a profit.

The FIEO has asked the commerce department to scrutinise imports from Hong Kong, which was the country’s sixth-largest import partner in the previous year, a steep rise from 13th spot in FY18.

Trade deals needed

Exporters are seeing orders that had been cancelled being reinstated.

A case in point, the garment sector has received orders from buyers who hitherto sourced from China, said Saraf.

To boost exports in the short to medium term, he said India should reach out to nations with rising anti-China sentiment such as the European Union (EU), the United States, Australia, New Zealand, Canada, and Japan, positioning Indian goods as an alternative.

As a result, the FIEO has strongly batted for India resuming bilateral talks with various nations to ink free-trade agreements (FTAs).

“We need to join at least some trading blocs to get tariff benefits, which are being taken away by competing nations.

"Vietnam’s recent FTA with the EU will give it a solid advantage over Indian exporters since they will get access to a huge market at much lower tariffs,” stressed Saraf.

Photograph: Aly Song/Reuters

With inputs from Dilasha Seth