Chinese products will once again find their way into the Indian markets after a stalemate of about four years on the import clearances due to poor diplomatic ties with Beijing. The Indian government has begun receiving pending applications from companies interested in importing various products, including electronic components, footwear, steel products, and household goods.
The approvals were put on hold since early 2020, when border disputes between the two countries derailed trade and diplomatic relations. Quick clearances were still given to local factories, but foreign, especially Chinese, manufacturing units received slow approvals. This caused a break in the supply chains in various industries that rely on imported raw materials and components.
The rising demand has given urgency to the government's decision for consumers. The reduction in the Goods and Services Tax (GST) rate in late September has increased demand in the consumer goods segment. Electronics and car manufacturers have been complaining of high rates of inventory loss, and some have been having long queues for high-quality models. The government is now keen to ensure there are no more gaps in supply by accelerating the certification of overseas suppliers.
Bureau of Indian Standards (BIS) certification is required for the import of regulated goods. This certification requires that the manufacturing plant overseas be physically inspected to demonstrate compliance with Indian quality control standards. Although domestic manufacturers were granted immediate certification, Chinese plants have been significantly slower in obtaining it since 2020, resulting in disruptions to the supply chains of large-screen televisions, washing machines, and air conditioners.
A senior official from the Department of Promotion of Industry and Internal Trade (DPIIT) has requested that manufacturers provide company-wise information on how certification delays are impacting imports. Depending on individual evaluations, the department will begin issuing and renewing supplier licenses in several countries, including China.
The reconsideration process aligns with the recent positive developments in trade between India and China. Exports of critical industrial materials, such as heavy rare earth magnets, which are crucial to industries like renewable energy, electric vehicles, and consumer electronics, have also been resumed by China.
The shift occurs at a time when India and China have been gradually improving their diplomatic and economic relations. Direct flights between the two nations have also been revived, and India has also reinstated business visa issuance to Chinese nationals.
Regardless of these developments, the inflows of foreign investment in China will still be subjected to scrutiny in the Press Note 3 framework. In addition, the Indian government has also shown its willingness to stabilize local supply chains and invest in local production of industries by removing the importation restrictions.