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China's WTO entry may give Indian biz a headache

Indian businesses need to improve their efficiency, upgrade their technology and productivity to face the increasing challenges posed by China's imminent entry to the World Trade Organisation, official sources said.

"Since India removed quantitative restrictions completely, pressure has mounted on its industry to improve efficiency and productivity standards quickly to meet the forces and challenges of global competition. This is particularly true with the entry of China," Planning Commission member, N K Singh said.

China's membership in the WTO is expected to be approved on November 10 Doha, Qatar, ending the country's 15-year negotiations with its trading partners.

As India and China are "dominant developing countries," they have an opportunity to forge close partnership and to voice the concerns of developing countries to ensure a level playing field for better access to their goods and services, Singh said.

According to an official study India would face challenges in five areas due to China's entry into WTO.

China is likely to attract greater flows of foreign direct investment to the detriment of other developing countries in Asia, including India, the study said.

The phasing out of the Multi-Fibre Agreement by 2005, which would end the reserved quotas for exports of garments and textiles from developing countries to the developed countries, might help China in capturing larger market share in this key sector as per a study.

Similarly, China's exports of footwear, toys, leather products, artificial flowers and other labour-intensive low-cost items would increase significantly on its accession to the WTO, the study said, adding India's export markets in these commodities would be directly threatened.

India's exports of electrical and electronic products also needs to be competitive in order to withstand the Chinese onslaught, the study noted.

Further, the study pointed out that in a WTO-dominated world, which requires the lifting of quantitative restrictions on imports, Chinese goods could flood the Indian market.

Indian businesses have been slower, when compared to the rest of the world, in exploiting the opportunities presented by the opening up of the Chinese market, an official noted.

However, India has the potential to increase exports of agricultural and marine products, mineral ores, building material, chemicals, pharmaceuticals and computer software to China in the post-WTO period, the official said.

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