India's plans for higher tariffs on Chinese imports could impact auto industry

India plans to impose stringent quality control measures and higher tariffs on imports from China, people with the knowledge of the matter said, as a military standoff between the neighbours threaten economic ties.

The state-run Bureau of Indian Standards is finalising tougher norms for at least 370 products to ensure items that can be locally produced aren’t imported, the people said, asking not to be identified citing rules. The products include chemicals, steel, electronics, heavy machinery, furniture, paper, industrial machinery, rubber articles, glass, metal articles, pharma, fertiliser and plastic toys.

Discussions are also on to raise import duty on products including furniture, compressors for air conditioners and auto components, they said. The proposal is being evaluated by the Finance Ministry amid the government’s push for local manufacturing.

The Trade Ministry is separately evaluating non-tariff measures to check Chinese imports in a manner that conforms to the World Trade Organisation rules. Such measures would include more inspections, product testing and enhnanced quality certification requirement, the people said.

The move comes at a time when India is staring at its first contraction in more than four decades after the country was put into the world’s most stringent lockdown to check the spread of coronavirus in March. The International Monetary Fund’s forecast gross domestic product will decline 4.5% in the fiscal year through March 2021, compared with an April projection of 1.9% growth.

“If India were to raise barriers to imports from China by means such as higher tariffs, Indian people and companies end up paying more for consumer, capital and intermediate goods," said Louis Kuijs, head of Asia economics at Oxford Economics Hong Kong Ltd. “That would be another economic headwind at an inopportune time but not necessarily a disaster."

A spokesperson for the Trade Ministry refused to comment, while a Finance Ministry spokesman didn’t respond to a call made on his mobile during office hours.

China is India’s biggest source of imports, with purchases including electronic goods, industrial machinery and organic chemicals running into almost $70 billion last year. Beijing enjoys a trade surplus of about $50 billion with New Delhi.

The need for import substitution started after disruptions to raw material supplies from China in the wake of the coronavirus pandemic. A deadly clash between soldiers from both countries along a contested Himalayan border this month added to calls for that process to be expedited.