After reeling under the adverse impact of the global economic deceleration for almost a year now, Indian SMEs are now grappling with another major problem - cheaper Chinese imports.
The dumping of low-priced goods by Chinese manufacturers and exporters has eaten into the market share of domestic SMEs in the Indian market, raising concerns about their competitiveness and sustenance.
Besides, casting a shadow on the business prospects of domestic small-scale units, the cheaper Chinese goods flooding the Indian market are also posing a threat to foreign direct investment (FDI) inflows into the country, thereby jeopardizing the growth of the economy as a whole.
India most favorable dumping ground Most western countries are cutting down on their imports and have formulated stringent anti-dumping laws to prevent the influx of unfairly low-priced goods.
This compelled Chinese manufacturers to scout for alternative markets to offload their stocks.
Thus India emerged as a convenient destination for the same.
"The geographical proximity, growing population and the high consumption rate have made India a preferred choice for Chinese manufacturers.
Moreover, the absence of stringent anti-dumping laws makes it an easy dumping ground for other countries," commented A Ghosh, proprietor of Kamal Engineering Works, a small-sized engineering firm in Kolkata.
Besides China, Korea and Ukraine are also increasingly treating India as an alternative market to sell their unsold stocks at lower prices.
Cheaper imports have not only resulted in a shrinking domestic market for locally made goods, but have also eroded the competitive edge of Indian exporters in the overseas markets.
Due to stiff competition from Chinese imports, a large number of SMEs are incurring huge losses.
According to a recent survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), nearly two thirds of businesses surveyed reported heavy losses on account of dumping.
"Rising imports from China have left Indian companies high and dry as domestic firms are unable to withstand the competition posed by cheaper goods, both in the domestic and international markets," said Pran Bhalla, spokesperson of DRP Metal Works, a small-sized cock and valve manufacturer in Ludhiana, Punjab.
A large number of SMEs, especially those manufacturing processed food items, plastics, engineering goods, Chemical Products, sanitary ware, metal, non-ferrous metals, steel, ceramic tiles, chemicals, pharmaceuticals have been affected by the deluge of low-priced imports.
To prevent further losses, the SME segment has demanded the imposition of stringent anti-dumping laws and slapping heavy fines on defaulters.
Technological upgrades will also help smaller units to enhance their competitiveness and withstand the onslaught of cheaper Chinese products.