MSME items which include cycles, should be saved out of RCEP talks. Chinese cycle imports via Lanka, Bangladesh should be curbed. The Indian bicycle enterprise plays an essential role within the increase, development, and growth of the Micro, Small Medium, and Enterprise (MSME) quarter. India is the second-largest producer of bicycles, next only to China, and manufactures around 1.5 crore bicycles each year. The Indian bicycle production and bicycle additives industry is widely recognized for its wonderful pleasant requirements and range inside the global marketplace.

bicycle industry

Today, the industry is in deep crisis because of growing cheap imports from Bangladesh, Sri Lanka, China, and low-price South-East Asian international locations. The total imports of bicycles, bicycle elements, and components extended to $862 million in 2018 from $637 million in 2011. Half of the overall imports are from China and Japan. However, a current surge in imports from Bangladesh and Sri Lanka has emerged as a primary risk for the Indian bicycle industry.

The given chart analyses the imports falling under HSN code 87120010 (bicycles and different cycles, consisting of shipping tricycles, now not motorized) from Bangladesh and Sri Lanka. It is essential to word that India’s imports from Bangladesh turned into $0.14 million in 2011, which rose to $5 million in 2018, reflecting a CAGR of sixty-six. 17 inline with cent. Similarly, India’s imports from Sri Lanka have been $1.01 million in 2011 and reached $22 million in 2018, indicating a CAGR of fifty-five .44 according to the cent.
Contributing elements

This raises an essential query at the factors that could have contributed to the constant upward thrust in imports in this particular product category from Bangladesh and Sri Lanka. Broadly, there are wellknown arguments in this context. First, the import obligation on bicycles in India is 0 beneath the Agreement on South Asia Free Trade Area (SAFTA), which provides responsibility-free entry to Bangladesh and Sri Lanka bicycle manufacturers in the Indian market. On the alternative hand, import responsibility in Bangladesh and Sri Lanka is 25 in line with cent and 30 in line. High import responsibility enables Bangladesh and Sri Lanka to shield their bicycle enterprise.
China imports

However, preferential benefits prolonged by using India can’t be a dominant issue because of the excessive increase in imports of bicycles from Bangladesh and Sri Lanka. The solution to this lies inside the 2nd argument. Many bicycle producers in India consider that low-fee Chinese bicycle manufacturers are routing their merchandise to India through Bangladesh and Sri Lanka, thereby taking undue advantage of the preferential marketplace under SAFTA. This is evident from the imports of Bangladesh and Sri Lanka from China. Imports of bicycle parts and components from Bangladesh were $24 million in 2011 and improved to $65 million in 2018. Similarly, imports of bicycle elements and additives from Sri Lanka multiplied by $19.5 million in 2011 and reached $32.3 million in 2018.

There has been a growth in imports in intermediate product classes, encompassing frames and forks and elements thereof, hubs aside from coaster-braking hubs, wheel rims, spokes, saddles, inner tubes of rubber, threaded screws and bolts, nuts and washers, pedals, and crank-gear.

These products must be intermediate merchandise and are used to manufacture bicycles in Bangladesh, Sri Lanka and eventually exported as completed merchandise to India. A boom in India’s import of bicycles beneath the HSN code 871200010 from Bangladesh and Sri Lanka actually displays that Chinese low-price bicycle manufacturers can enjoy obligation-free marketplace access in India without being a party to SAFTA.

Besides, Bangladesh and Sri Lanka bicycle manufacturers favor importing components and additives from China vis-a-vis India, as the latter is charge-aggressive. Parts and components imported in Bangladesh and Sri Lanka from China attract low advert-Valorem obligation because of their lighter weight. This provides an added incentive to Bangladesh and Sri Lanka bicycle producers to import elements and components from China.
RCEP negotiations

Challenges for the bicycle industry are likely to compound with the finalization of Regional Comprehensive Economic Partnership (RCEP) negotiations. A massive volume of imports is from China. Tariff liberalization under the RCEP will offer right away access to Chinese bicycle manufacturers within the Indian marketplace and threaten the domestic bicycle manufacturing enterprise.
Way Forward

Given these challenges, it’s far vital for India to undertake a calibrated method in this regard. India may additionally keep in mind placing a “sourcing limit” on using 0.33-u. S. A. Imported inputs in the exports of Bangladesh and Sri Lanka. This may be done by using modifying the prevailing regulations of starting place of SAFTA, and it could endorse the sourcing restriction in regards to the levels of production so that Bangladesh and Sri Lanka bicycle producers are recommended to source from FTA partners.

Such an approach could assist India no longer most effectively restrict imports of bicycles from third nations consisting of China. Still, it could also contribute to the improvement of regional value chains in the South Asian area. Therefore, India must advocate a similar provision in future exchange agreements so that the preferential marketplace benefits get right of entry to are not leveraged using non-FTA partners.

Most importantly, it’s miles critical for India to hold MSME products together with bicycles inside the exclusion list underneath the RCEP to guard the industry against low-value Chinese merchandise. Gupta is Executive Director, and Singh is Senior Deputy Director at the Engineering Export Promotion Council, subsidized via the Ministry of Commerce and Industry.