India Faces Trade Dilemma as Chinese Viscose Yarn Floods Market Amid US Tensions

India's textile industry is feeling the sting of Chinese competition, prompting calls for urgent action.

Amidst escalating trade tensions influenced by US tariffs, Indian businesses are grappling with a sharp decline in demand for locally produced viscose yarn, a key material in garment manufacturing. Thirunavkarsu, who runs a spinning mill in Tamil Nadu, reports a staggering 40% drop in orders, as cheaper Chinese imports flood the market and undercut local prices.

The price shift comes as Chinese producers, reacting to US tariffs that can reach up to 145%, pivot towards alternative markets such as India, leading to the dumping of yarn. Despite producing most of its viscose yarn locally, India cannot compete with the low prices set by Chinese manufacturers. According to Jagadesh Chandran from the South India Spinners Association, almost 50 small mills are reducing production, threatening to scale down operations further without intervention.

Chinese Ambassador Xu Feihong has assured India that his country will refrain from dumping, instead expressing interest in importing more quality Indian products. However, the fear of market invasion by cheap Chinese goods spans various sectors in India, due to China's dominance in global exports across multiple industries.

Recent WTO data reveals a surge in complaints against Chinese exports, with a record number of investigations pointing to dishonorable trade practices, especially affecting nations reliant on Chinese imports. India's current trade deficit with China stands at a concerning $100 billion, worsened by a 25% increase in imports in the electronics sector alone.

In response, India's trade ministry has initiated measures to monitor the increasing influx of inexpensive Chinese goods, including implementing a 12% tax on specific steel imports aimed at curtailing the detrimental competition faced by local mills. Despite these protective actions, India’s reliance on China for intermediate manufacturing goods remains significant, complicating efforts to pivot towards self-sufficiency.

While international companies like Apple begin diversifying assembly operations to India, the country’s dependence on Chinese components for production remains pronounced, reflecting a persistently high trade deficit.

Experts are sounding alarms regarding the potential long-term impacts of this imbalance on India's manufacturing growth and overall industrial stability. They assert that without addressing core competitiveness issues, the opportunity presented by US-China trade tensions may slip away.

India must establish a transparent dialogue with China regarding fair trade practices amid increasing scrutiny and competition, emphasizing the need for protective measures similar to those advocated in Western nations.