China’s economy is facing significant challenges. Despite their government’s concerted efforts to project otherwise by claiming the country’s GDP to achieve 5.2% growth this year, critical issues still remain evident. The country’s consumer spending is weakening, and the housing market is yet to make a recovery from its 3-year slump. Naturally, China’s consumption of major nation-building materials such as polyvinyl chloride suspension (PVC-S) has taken a nosedive. However, its economy cannot afford to slowdown the production of such products, as it would lead to large-scale unemployment in China. Hence, China has doubled down on exports by further reducing prices to marginal costs or even lower, just to keep their economy running and preserve their jobs. Since major Western economies have raised trade barriers to curtail the Chinese onslaught of price undercutting in recent times, India has ended up becoming a major dumping ground for Chinese PVC.
So, what is the impact of such an action by China?
The predatory prices at which China dumps PVC in the country is lower than the cost of production, which makes it very difficult for Indian manufacturers to survive, let alone compete in this capital-intensive industry. This is dangerous because PVC is fundamental for projects that are crucial for nation-building and is used extensively in sectors such as pharmaceuticals, healthcare, automotive, construction and irrigation. Relying heavily on imports for PVC supply exposes the downstream industry to supply-chain vagaries, given what we have seen in recent years of geopolitics and pandemics disrupting global supply chains.
The stakes are high—India’s demand for PVC-S is projected to reach 7 million metric tonnes by 2030, even under conservative estimates, compared to current domestic capacity of 1.6 million tonnes. Considering this, India’s domestic industry has committed to invest nearly INR 64,000 crores to increase production capacity and help India become self-reliant (Atmanirbhar) in PVC capacity. However, these investments are being jeopardized by the rampant dumping of PVC-S by exporters undermining the competitiveness of the domestic manufacturers. If remedial measures to prevent unfair trade practices are not taken, such investments face the risk of turning into non-performing assets (NPAs) which could have a detrimental impact on the country’s banking system and the larger economy as a whole. Furthermore, the jobs that could have been created if such investments were to fructify, will be lost.
The government of India had in the past taken decisive steps to address this issue by imposing anti-dumping duties (ADD) on PVC-S imports from countries such as China, Japan, Taiwan, Indonesia, Korea, and Thailand. However, these duties have now lapsed, with the most recent ones on China and the USA ending in 2022. Since then, dumping of imports from these nations resumed. As a result, PVC imports to India surged, nearly doubling from 1.4 million metric tons to 2.6 million metric tons, with imports from China alone growing by 255% during this period. Despite the government’s earlier efforts, the expiration of these duties has reopened the gates for dumping, leading to an already stifled domestic PVC industry now struggling to survive. The resurgence in imports after the expiry of ADD underscores the need for the continued imposition of ADD to prevent exporting countries from dumping into India and destroying the local industry.
India is experiencing rapid economic growth, with millions breaking free from inter-generational poverty every year. As aspirations for improved living standards continue to peak, the demand for better housing, access to clean water, and quality healthcare is set to rise exponentially. Such crucial advancements in social and physical infrastructure rely heavily on the availability of PVC-S. Hence, it would be prudent for India to safeguard its own domestic capacity of PVC and the investments attached with it to build supply-chain resilience and avoid excessive dependency on imports.
Given this context, restoring anti-dumping duties (ADD) on PVC-S imports will not just be a trade measure; it will be a vital step taken towards securing India’s economic future and also improving the quality of life for millions of its citizens.
Views expressed in this article are of the authors. Dr. Jaijit Bhattacharya is the President of Centre for Digital Economy Policy Research; Shreedutt Patnam is a Senior Policy Analyst at C-DEP
