By Aarush Venkatesh

Abstract

The study evaluates the influence of anti-dumping tariffs on the “Make in India” campaign, determining how effective they are in fostering indigenous manufacturing and growth in the economy. It investigates the function of the Directorate General of Foreign Trade, assesses import restrictions on goods, and examines the effect of anti-dumping legislation in promoting regional production of commodities. The article also navigates anti-dumping duty issues and disputes, emphasising the need of adhering to international trade accords but also recognises the challenges of growing economies like India in doing so. The article seeks to create a balance between worries about protectionism and possible benefits for local business and technical self-sufficiency.

What are Anti-Dumping Duties? Why are they important?

In a market, the act of a market for a given commodity being flooded by foreign supplies for a price lower than cost or lower than a fair sale price, given the cost structure can be harmful for local companies providing the same commodity. ‘Dumping’ may entail selling at a loss in order to weaken local competition and capture large market shares. Trade practices like this tend to destroy the prospects of indigenous companies for growth as they either cannot compete with the low price, or they cannot sustain themselves with a reduced market share as their economies of scale are gradually whittled away.  This practice has the potential to disrupt the local market and result in job losses.

The imposition of a “duty” or a fee, by the government of a nation, on imported products that are offered on the local market for less than their cost or at a sale price that is significantly lower than those of local suppliers is known as anti-dumping duty. It acts as a protective measure to prevent foreign business players from creating artificial barriers that make it difficult for indigenous companies to enter the market. Anti-dumping duties are imposed to level the playing field for domestic businesses and to mitigate the detrimental consequences of dumping.

Why is the need for such taxes increasing in importance in India?

Businesses may use dumping as a tactic for a number of financial and strategic reasons. The following are some typical explanations for why businesses engage in this practice:

1. Market Penetration: Businesses may resort to dumping in order to establish a presence in a new market or boost market share by providing goods at a cheaper cost than regional rivals. Often foreign businesses have the capacity to incur losses temporarily to gain a greater market share as compared to their regional counterparts.

2. Overproduction: Businesses that have unsold inventory may export goods at a discount in order to move out of their excess stock. This older inventory is often dumped into other markets thereby hindering the sales of local players and, at times, affecting the quality of products offered to the consumers.

3. Market Dominance or establishing a Monopoly: Businesses may use dumping in foreign markets to put regional rivals out of business, or eat up a significant amount of their market share, to eventually become the dominant players in that market or even potentially establish a monopoly.

4. Price discrimination and dumping: Businesses may occasionally use price discrimination in conjunction with their dumping tactics. When companies want to gain market share or undercut regional rivals, they could charge more in their own market while exporting the identical goods to other countries at far cheaper prices.

It is worth asking why it is important for countries like India to adopt such policies, especially in the past decade, as India has been very aggressive with its imposition of such duties on supplies from other countries, notably China. Under the Ministry of Commerce and Industry’s jurisdiction, the Directorate General of Foreign Trade (DGFT) is a prominent regulatory body in India. The country’s international trade strategy is formulated and implemented by the DGFT. In order to ascertain if foreign goods are being marketed in India at rates lower than their fair market value, the Directorate General of Foreign Trade (DGFT) examines suspected dumping cases. This entails a careful analysis of manufacturing costs, data on prices, and its impact on the local economy. In the event that proof of dumping and damage to local industry is discovered, anti-dumping duties are imposed, usually for a period of five years. A “sunset period” is a predetermined amount of time when anti-dumping duties are in place before being reviewed. Following this time frame, the necessity for ongoing responsibilities is assessed, and changes may be made in response to market conditions.

What can India attain from the imposition of such policies?

In September 2014, the Government of India introduced the “Make in India” programme. India has engaged in the “Make in India” scheme for the following reasons. Firstly, it acts as a stimulant for the economic expansion of indigenous companies with the goal of increasing the manufacturing sector’s contribution to the GDP of the country. The scheme has been envisioned to create employment opportunities, especially by incentivizing increased investments in such businesses. It has been observed that the programme emphasises the growth of industries such as automobiles, electronics, pharmaceuticals, textiles, defence and renewable energy.

This will help lessen India’s reliance on imports. This would strengthen the nation’s economic resilience by encouraging self-reliance in important industries, reducing vulnerability to interruptions in the global supply chain, as demonstrated by the COVID-19 pandemic. By promoting industrial innovation, the programme hopes to establish India as a Centre for technologically sophisticated enterprises. In my opinion, anti-dumping duties play a major role to achieve this goal as it helps create a vacuum, which local industries can occupy to keep up with the growing demands of our economy. These duties correspond with the initiative’s objective of bolstering home production by preventing domestic industries from being undercut by inequitably cheap imports. The expansion of India’s manufacturing ecosystem is facilitated by anti-dumping laws, which also promote investments and foreign direct investment (FDI) in regional manufacturing facilities. These tariffs contribute significantly to the realisation of “Make in India’s” goals of economic development, technical advancement, and self-reliance by lowering import dependency and encouraging innovation.

What has been the impact of these policies? What are the challenges we face?

Anti-dumping duties have a big impact on the Indian market, affecting trade relations, local industry, and the country’s overall economic environment in a variety of ways. These are protection duties, but they also have advantages and disadvantages.

In a positive way anti-dumping duties provide Indian manufacturers a strong defence. By combating unfair trade practices, such as dumping, they level the playing field, enabling domestic businesses to compete with international ones on an equal footing. The government’s flagship programme “Make in India”, benefits from this protection as well because it encourages domestic production and reduces India’s need for imports. Interestingly, job possibilities are created and strengthened by this protection, particularly in industries vulnerable to competition from low-cost imports.

On the other hand, international trade relations may be strained by the application of anti-dumping duties, which may prompt trading partners to take retaliatory measures that might jeopardise India’s exports and market access. Furthermore, as the costs of goods covered by these regulations may rise and affect consumer choices and affordability, consumers may be the ones who suffer the most as a result of these levies. In addition, anti-dumping investigations are complex and need a significant amount of time, people, and knowledge in order to determine the extent and occurrence of dumping. Anti-dumping rulings may potentially give rise to legal challenges, which would complicate the resolution process even further.

Anti-dumping duties are a powerful tool that impact the Indian economy, providing both benefits and drawbacks. India has the challenges of striking the correct balance between defending its own industry and avoiding protectionist measures.

Fostering room for growth 

As we may have now noticed, anti-dumping duties by itself will not be enough to nurture an economy that is turning into a manufacturing hub. It is necessary to couple such policies with other factors that help promote the growth of a market. However, such goals come with a unique set of challenges. When we consider the example of the recent decision to restrict the import of laptops in India, we see that this raised numerous concerns for both the producers and the consumers. The DGFT released a notification in August of this year mentioning that companies will now require a licence in order to import laptops, tablets, 2 in 1s and similar electronic devices into the country. From the perspective of a consumer, this would mean a significant increase in the costs of products from desired brands. Although such a situation does help in the growth of Indian brands, consumers would be far more comfortable buying laptops from established brands with a solid network of peripheral resources and support. Such policies will also face backlash from the producers and other foreign governments and we did observe the same in this case. The Government of India eventually had to retract plans for imposing these duties for severe backlash from companies and foreign governments like the United States. This constant tussle between the interests of the producers of a foreign nation and the local economy revolves around striking a balance between protecting domestic industries and maintaining a competitive global market.

Conclusion

In conclusion, anti-dumping duties have a significant influence on how India’s economy develops, having an effect on a variety of sectors, trade dynamics, and aspirations for economic independence. These tariffs support the ‘Make in India’ strategy and offer vital protection for homegrown companies, but they also present difficulties because of possible trade disputes, the impact on consumer prices, and the difficulty of conducting thorough investigations. For India, navigating the difficulties of international trade relations and domestic economic growth means maintaining a fine balance between protectionism and fair competition. Maintaining India’s reputation in the international trade arena while promoting indigenous industry requires careful balancing of anti-dumping policies.

Author’s Bio

Aarush Venkatesh is a second-year law school student from Jindal Global Law School and a member of the Economics and Finance cluster of Nickeled and Dimed. He is curious to learn more about the influence of law in the evolution of technology. He is also interested in reading and writing on topics around the relationship between international relations, trade, law and technology in the modern global discourse.

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