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India
OpinionComment
Charu Bahri
Charu Bahri

Opinion | Protectionism not the answer for an Indian manufacturing sector in need of support and investment

  • How the government responds to industry complaints about cheap imports will reveal much about its plans for India’s manufacturing sector
  • New Delhi cannot afford to go slow in creating a better business environment or turn away firms looking to grow in the country

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Illustration: Craig Stephens
Charu Bahri
Sandeep Singh, the managing director of Tata Hitachi, called in June for a level playing field in the Indian construction equipment market. Tata Hitachi – a joint venture between Tata, one of India’s biggest multinational conglomerates, and Japan’s Hitachi – manufactures and sells excavators, loaders and other construction equipment.
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Singh spoke of “unheard of” undercutting by Chinese players that was eating into the margins of domestic construction equipment brands, on the back of which he said Chinese brands had cornered nearly 20 per cent of the Indian construction equipment market. His comments come at a delicate juncture, on the heels of a crackdown on Chinese smartphone makers in India and at a time when India-China relations are “not normal”, as Indian Foreign Minister Subrahmanyam Jaishankar put it.

The Indian Construction Equipment Manufacturers’ Association (ICEMA), an apex industry body, said that the Indian construction equipment industry faces competition from cheaper imports in earth-moving, material-handling and other product segments. According to ICEMA, the Indian construction equipment industry is the world’s third-largest, after China and the US. But it is a distant third with a marginal share in global exports

Cutthroat competition in the Indian construction equipment market is an outcome of the sector’s impressive growth. Construction equipment sales grew 26 per cent year on year in the previous financial year, crossing 100,000 annual sales across all segments, a result of the government’s continued focus on infrastructure development and mining.

Singh said the construction equipment manufacturing industry had asked the central government to look into the matter and help ease the effects of the influx of Chinese players. He said he hoped there would be “a solution that will protect the interests of manufacturers” like Tata Hitachi, JCB, Hyundai, Volvo and Larsen & Toubro.

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The government’s response will speak volumes about its long-term vision for the construction equipment sector in particular and, more broadly, for India’s development as the next global manufacturing hub. Protectionism might be a quick fix, but it is not necessarily the best way forward for India.
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