Why Indian Micro Small and Medium Enterprises are Lagging Behind China ?



India & China the two super power of Asia are also the fastest growing economy in the world. With the growth rate averaging 7.3 per annum during 2014-15 and forecasted growth rate of 6.7 during 2016-20 with the GDP of $1.65 trillion, the once poor and inward looking China is the fourth largest economy in the world. Being a late starter India has initiated liberalization policy in the early 90’s compared to its counter part China which is running its train successfully in the same track since 1978.

India’s average annual economy growth rate was 7.3% in 2003 and 7.5% in 2004 -05 at the same time Per Capita Income (CPI)increased around more than double from 1978 to 2005- 06, while for China it jumped sharply around 4 times in the same period . The vast difference in increase in growth of GDP is due to the difference of engine of growth they have adopted. China is driven by its vast and diverse manufacturing sector, while India is fuelled by extraordinary growth in services, especially in IT sector. The main reason behind the dissatisfactory result of India is whatever reform or liberalization policy it has been taken, have been by-passed India’s Agricultural sector, accounting 20% of GDP and provides livelihood roughly 70% of population. The Agricultural sector still depends on the vagaries of monsoon resulting a less than a 1% growth during the last 10 years with an annual population growth of about 1.9% per annum.

The proportion of Indians, living in BPL category fallen from 40% to 25% from the last ten years even though the population has been growing with the galloping speed. In China the improvement in living standard is spectacular. Between 1981 to 2001 the proportion of BPL category has been fallen from 53% to mere 8% only, this means the across china there are about 400million fewer people living in extreme poverty in 2001 than 20 years previously. What explain the china’s phenomenal success in reducing poverty and what India can learn from it? While China’s labour intensive manufacturing led development is widely credited with large scale employment creation and thereby poverty reduction, the Agricultural sector reform had also played a significant role in economic growth and poverty reduction.

The Facts made China to Keep Indian MSMEs down

China made consumer durables does a trade of over 8 – 10 million rupees a day according to market insiders.

  • Chinese goods have a vast retail network across the country including remote villages without any media hype or promotional support.
  • The existence of local artisans engaged in fabricating idols are severely threaten by the entry of china made innovative, decorative and lucrative idols at reasonable price which make our artisans difficult to compete with their higher price and conventional idols. To quote an example from Maharashtra and WestBengal where such artisans are forced to the state of starvation as China made Lord Ganesha, Goddess Durga and Kali have emphatically replaced our country made idols.
  • Once world renowned Aligarh Locks Industry has also lost its stature with the arrival of Chinese lock having innovative features and less price thus making lock artisans hard run for their livelihood.
  • Ferozabad, which had been meeting the country’s requirement of glassware since long had been adversely hit by Chinese industry with their fancy product and therefore led the local manufacturer in dilemma about their future.
  • Sivakasi, the hub of firecrackers is also being fired as it is aheading in to the dump cause more superior, colourful and affordable Chinese crackers swept them out
  •  India’s Toy industry is loosing its ground to Chinese products. Electronic toys, soft toys, decoration toys, plastic toys and other items have virtually elbowed out the Indian toys from the market. …..the list continues as other items like attractive chandeliers, watches, battery cells and even decorative items all made in china have flooded the Indian market


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