As relations between India and China worsen, New Delhi is considering measures to prevent trade partners mainly in Southeast Asia from re-routing Chinese goods to India with little added value.
Two government sources told Reuters that India is planning to raise quality standards of imports, impose quantity restrictions, mandate stringent disclosure norms and initiate more frequent checks at ports of entry for goods coming from many Asian countries. According to the sources, the measures will mainly target imports of base metals, electronic components for laptops and mobile phones, furniture, leather goods, toys, rubber, textiles, air conditioners and televisions, among other items.
Last week, India’s Trade Ministry issued a notice to restrict inbound shipments of TVs by requiring importers to get a special license. The restrictions are expected to primarily hurt Malaysia, Thailand, Vietnam and Singapore, which are members of the Association of Southeast Asian Nations (ASEAN) and with which India has a free trade agreement (FTA). India is also worried about heavy trade flows from South Korea.
“Raising duties has a limited impact,” one of the unnamed officials said, adding: “Now we want to raise quality standards and also make sure that goods in FTA routes have roots in those countries. So, customs would be more vigilant than before.”
The government will also discuss raising the value-addition requirement for products imported from those countries from the current level of 20 percent to 40 percent, the official said, adding that FTAs could be reviewed too.
“A lot of the Asian partners have become a place from where just Chinese goods are routed. We are going product by product to design various kinds of action, most of which will be on non-tariff lines,” the official said.
According to the sources, the government was inclined to only stick to those free trade agreements that it deems mutually beneficial. India has a trade deficit with most of the countries with which it has signed FTAs.
The tightening of regulations on imports from China follow a deadly clash in June between Indian and Chinese soldiers along a disputed border in the Himalayas in which 20 Indian soldiers were killed. New Delhi has since imposed 100 percent physical checks on shipments from China, which is its second-biggest trading partner. Trade turnover between the two countries was worth $87 billion in the fiscal year ending March 2019, with a trade deficit of $53.57 billion in China’s favor, the widest India has with any country.