By Aruna Sharma
India’s accelerated growth vision is guided by ‘Make in India’. MSMEs are to be encouraged for the twin goal of sustained growth and sustainable employment growth. However, many policies, instead of helping meet stated goals, end up having a negative impact. Suspension of anti-subsidy duty wrt China and interim anti-subsidy wrt Indonesia—announced in Budget FY22—has had an adverse impact on Indian stainless-steel industry, with imports from China and Indonesia going up by 177% in just the first four months of FY22.
The suspension decision—opening up the market for stainless-steel-flat-products imports at dumped/subsidised prices from China, and Chinese investments in Indonesia (the hurt to the Indian industry was reported after detailed investigations)—provided rich opportunities to Chinese/Chinese-backed exporters. Investigation recommended continuing with the duty protection. However, a sudden change was effected through the budget, and the adverse impact of these decisions have become apparent from the sudden surge in imports. Imports in first four months of FY22 have increased by 177%, over the average for FY21. Imports from Indonesia are 236% higher and from China are 334% higher. The July import figure are even more alarming. The combined share of imports from China and Indonesia are at an all-time high of 76%, in which China’s share is 59%.
Stainless steel, despite being 3% by volume (of overall steel in India) plays a critical role due to “corrosion resistance” making it a metal of choice. Indian stainless industry is ‘atmanirbhar’ in terms of capability and capacity to serve our nation as well as exports. Stainless steel is environment-supportive, people-friendly, and economical. It operates on a relatively low margin compared to the rest of the steel industry. Therefore, it is more vulnerable to vagaries of the marketplace. Despite inherent disadvantages like cost of capital, logistics, and dependence on imported raw material, ‘Made-in-India Stainless Steel’ is competitive against most developed economies.
The government has taken proactive steps in evolving BIS standards to ensure high-quality production, and Indian producers have met the challenge, guarding against high-nickel (cheap but harmful) steel exported to India.
However, the ecosystem has been continuously distorted due to Chinese and Indonesian dumping, where Chinese and Indonesian governments-backed non-WTO compliant subsidies of 20-30% prevail. This has been established by investigations across the globe, including those carried out by the Indian government. As a result, Indian companies, particularly the MSMEs, have been languishing. China is talking about removal of subsidy, but nothing has materialised so far; once done, the China price will be non-competitive. However, China has invested in Indonesia to displace India from its No.2 position in stainless steel. With the removal of countervailing duties, Indonesia will grow at the expense of India.
There is an unfounded belief that the MSMEs that make the end-product (especially utensils) will get imports that are 7-8% cheaper, but with BIS standards, and stainless steel abundantly used, it is important to have end-products conforming with high quality standards. Indian manufacturers are capable of providing adequate quantity and quality of stainless steel at a competitive price.
Creation of ‘level playing field’ against China and Indonesia will restore confidence to manufacture in India and encourage expansion plans. It will also save foreign exchange, will motivate employment generation, help MSMEs thrive and further investments. The sudden barrier to this must be knocked down by imposing the anti-subsidy duty on China and interim anti-subsidy duty on Indonesia.
The author is Practitioner development economist and former secretary, Govt of India