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MSMEs – The Largest Employers In The Country Face A Threat From Chinese Imports

The Logical Indian

November 2nd, 2015

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Originally Published On Factly | Author: Rakesh Dubbudu | Image Source:TheHindu.com

Micro, Small & Medium Enterprises (MSME) are by far the biggest employers in the country today. According to the latest annual report (2014-15) of the Ministry of Micro, Small & Medium Enterprises, there are an estimated 4.9 crore MSMEs employing more than 11 crore people.

MSMEs – Number & Employment

According to the ministry’s annual report, the number of MSMEs and the employment generated by them have been increasing consistently. The number of MSMEs has increased by about 20% to 4.88 crore in 2013-14 from 4.11 crore in 2009-10. The employment generated by the MSMEs has also grown on similar lines to 11.14 crore in 2013-14 from 9.22 crore in 2009-10, representing a 21% increase.

micro-small-and-medium-enterprises-chinese-imports-threat_number-of-msme-employment

The average number of employees per establishment hasn’t changed much in the five years from 2009-10 to 2013-14. It has remained more or less constant, at around 2.3 employees per establishment. While this may not very high, a large number of these enterprises are one man establishments.

micro-small-and-medium-enterprises-chinese-imports-threat_average-number-of-employees-enterprise

Spread in the States

As expected, the top 10 in terms of the number of MSMEs is dominated by the larger states with Uttar Pradesh at the top with 44.1 lakh MSMEs. West Bengal has about 36.7 lakh followed by Tamilnadu (33.1 lakh), Maharashtra (30.7 lakh), Andhra Pradesh (25.9 lakh) in the top five. The other states in the top 10 are Kerala, Gujarat, Karnataka, Madhya Pradesh & Rajasthan. The only notable exception in this list is Bihar.

micro-small-and-medium-enterprises-chinese-imports-threat_top-10-states-largest-number-msme

According to the fourth All India Census of MSMEs, more than 92% of the enterprises are in the unregistered sector and these account for more than 81% of the employment. Less than 8% of the enterprises are in the registered sector accounting for more than 18% of the employment.

Share in GDP & Exports

The contribution of MSMEs to both the GDP & Exports is significant. According to the Ministry of MSME, the estimated contribution of the MSME sector to the GDP has been consistently more than 35% from 2009-10 to 2012-13. While it was 36% in 2009-10, it has grown to 37.5% in 2012-13.

micro-small-and-medium-enterprises-chinese-imports-threat_share-in-gdp-and-exports

Based on the export data maintained by Director General of Commercial Intelligence & Statistics, Ministry of Commerce, the share of MSMEs in India’s total export has been more than 40% in the last 3 years. From 43% in 2012-13, it has grown to 44.7% in 2014-15. MSMEs contribute nearly half of India’s exports.

micro-small-and-medium-enterprises-chinese-imports-threat_share-of-msme-in-indias-total-exports

The Chinese Import Threat

India’s trade deficit with China has been on the rise on account of decreasing exports and increasing imports. The trade deficit in 2014-15 has gone up to 48474 million USD. Indian MSMEs also face tough competition from cheap Chinese products as is evident in high growth of India’s imports from China.

micro-small-and-medium-enterprises-chinese-imports-threat_indias-trade-deficit-with-china

As per information compiled by Director General of Commercial Intelligence & Statistics, about 12 major product groups, largely manufactured by MSMEs in India, imports from China grew at a higher rate than their respective imports from all Countries combined during 2011-12 to 2014-15. These 12 product groups accounted for 74% of India’s total imports from China in 2014-15 and a significant proportion of Indian MSMEs seem to be adversely affected from Chinese imports.

These 12 product groups pertain to Electrical and Electronics, Mechanical and Metallurgical products on the one hand and Chemical, Glass & Ceramics based products on the other.

The government on its part has been imposing anti-dumping duties, permitted under the WTO, for restricting imports when such imports have been established as unfairly affecting the market for goods and services produced by Indian industries. As per the data available with Directorate General of Anti Dumping and Allied Duties (DGAD), about 1/4th (25%) of all the cases initiated since 1994 are against China. Till June 2014, a total of 166 such cases of anti dumping duty have been initiated against China and duty has been imposed in 134 such cases.

With regards to taking any strict action, India seems to be bound by WTO framework. While India has initiated certain actions like mandating BIS certification for certain products & prohibiting import of mobiles without an IMEI number etc, a lot more needs to be done if this threat has to be countered. There has to be greater focus on export oriented sectors.

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