LUDHIANA, India -- The Indian government, worried about Chinese-made bicycles and bicycle parts flooding in from neighboring countries, is looking into possible breaches of a regional free trade arrangement.
"Imports from [South Asian] countries are being monitored to assure that the goods coming from the route are not manufactured in China," said Badish Jindal, former vice chairman of India's National Productivity Council. "The process of monitoring has already started," he added, referring to a recent probe by the Ministry of Commerce and Industry into alleged violations of South Asian Free Trade Area rules.
SAFTA, which was signed by India, Bangladesh, Sri Lanka and five other South Asian countries, came into force in 2006 and is aimed at fostering cross-border trade and economic cooperation. But Indian bicycle and parts manufacturers, seeing a rapid increase in imports from Bangladesh and Sri Lanka, are crying foul.
"While there is little infrastructure to manufacture bicycles and cycle parts in these two countries, their imports [are] now matching and even surpass China. How is it possible?" said Harsimrat Singh Wadhwan, secretary of the United Cycle and Parts Manufacturers Association. He said the Indian government has been informed many times, but it is "taking it seriously only now."
According to Indian government data, imports of bicycles and parts from Sri Lanka totaled 11.5 million rupees ($160,000 at the current exchange rate) in the 2006-07 fiscal year. But the figure jumped to 1.6 billion rupees last year, compared with Chinese imports worth 1.2 billion rupees. Bangladeshi bicycle and component imports saw a similar rise. They reached 307.7 million rupees last year, up from 510,000 rupees in fiscal 2011-12.
"Sudden [increases in] imports from these countries indicate that it was China that was behind the cycle boom in these two countries, and is sending its goods without import duty via SAFTA routes," complains Jindal, who is also president of the Federation of Punjab Small Scale Industries Association.
Manufacturers in India's northwestern state of Punjab say SAFTA has dealt a severe blow. The state produces bicycles and components worth nearly 70 billion rupees annually, about 75% to 80% of the national total. The local industry has around 4,000 factories, operated by manufacturers such as Hero Cycles and Avon Cycles, and employs over 250,000 people.
"Misuse of the zero-duty channels by China through these countries cannot be ruled out," said Gurmeet Singh Kular, president of the Federation of Industrial and Commercial Organization (FICO).
The imports have been hard on India's domestic bicycle industry, mainly due to their low prices. A locally made roadster, a basic bicycle common in India, costs around 2,700 to 3,800 rupees, whereas comparable Chinese bicycles go for around 2,200 rupees. The price can be as low as 2,000 rupees for imports from other SAFTA countries.
With cheap cycles rolling in via SAFTA, many manufacturers are transforming themselves into parts dealers. Some are already importing goods from Sri Lanka and Bangladesh, sticking on their own labels and selling them in India.
Lakhwinder Singh, president of Karkhana Mazdoor Union, an industrial workers' union, said that over the past five to six years, "more than 4,000 workers in the cycle industry have lost their jobs," adding the number might be higher if unregistered workers are taken into account. In addition to India's economic slowdown and other factors, "cheap Chinese imports have severely hit poor workers who come to Ludhiana [the capital of Punjab] to find work," said Lakhwinder.
Bicycle makers are not the only ones struggling with a flood of imports from Bangladesh and Sri Lanka. The value of imported footwear from Bangladesh totaled just 890,000 rupees in fiscal 2010-11. By 2018-19, the figure had rocketed to 743.9 million rupees.
Vijay Dhir, an exporter of sporting goods in the Punjabi city of Jalandhar, says that cheap Chinese goods have already hurt the industry, and that abuses of SAFTA are making the situation worse. Dhir said that at least 200 manufacturing sites in Jalandhar have closed their doors due to the import surge.