Bilateral trade between China and India boomed to $71.45 billion in 2016-17 from $1.83 billion in 1999-2000

With India tightening its quality control for capital and consumer goods, this move that follows calls to curb cheap imports from China in a period of diplomatic tension between the two nations could have an impact on China’s imports. The new rule targets machinery, food processing, toys, electronic goods, construction and chemical sectors which are dominated by China and the rules comes amid greater scrutiny of mainland firms which are looking to enter the country’s multibillion dollar telecom and transmission business.

For toy retailers in India, who import everything from musical phones to toy cars and even robot, the new requirements have meant supply disruption right ahead of the Diwali festive season. The government has about 23,000 standards across industries and many of them are never fully enforced. Now, the government departments have been asked to carry out spot inspection and laboratory tests to ensure that the goods conform to the regulations. The new rules will apply to domestic firms as well as foreign manufacturers.

However, it is assumed that the targeted sectors are the ones in which China controls more than two thirds of the market like toys and stainless steel good industries and these are sectors where there have been complaints of substandard products. Further, the secretary of Indian Steel, Aruna Sharma said that her department will release new guidelines, raising the quality norms for welded stainless steel pipes which are used in oil and gas as well as construction sector.

Bilateral trade between the two countries boomed to $71.45 billion in 2016-17 from $1.83 billion in 1999-2000, although majority of this is skewed to Chinese exports. The trade deficit has widened to $51.1 billion in the last one year which is a nine fold increase over the last decade. These trade differences are now being amplified by the resurfacing of the long running border dispute.

Toys are imported to India in the highest number. The new testing requirements for toys lay importance on the chemical content as well as the flammability and demand a stringent testing for those which are operated electrically. China currently accounts for 85 per cent of India’s $760 million toy industry and the toys are priced between 50 cents to $150. Various toy importers are urging the government to delay the new regulations until the festive season is over, since it would choke supply. It could also lead to losses in terms of a huge amount of money paid as advance by the retailers to the suppliers overseas and also cause loss of jobs as some businesses which sell only toys will have to shut shop.

The new rules could hurt the local retail consumption, many participants in the industry argue that it will ultimately help the local firms by improving standards and will also keep the low end imports in check and increase compliance with the industry standards. The rules will have an impact on the local sellers in the country who are highly dependent on the Chinese toys and the rule will also have a significant impact on China’s imports.