Chinese Imports Invade India.

Outsourcing specialist Tata Consultancy Services (TCS:IN), the largest Indian IT services company, moved into the China market 10 years ago, eventually teaming up with the Chinese government to provide outsourcing services to state-owned banks and other financial institutions. A decade later the TCS head count in China is not even a rounding error in the company’s ledger: only 2,000 employees, compared with a global TCS staff of 235,000. Even with the government as a partner, an Indian company has to work hard at building relationships with potential Chinese customers. “It’s disappointing,” says Girija Pande, chairman of Asia-Pacific for TCS. Making headway in China “will take time.”

Of the 2.7 million people India’s IT services industry employs worldwide, just 16,000 are in China, according to trade association Nasscom. Indian companies struggle in China with nontariff trade barriers such as requirements to obtain security clearances before doing business with government-backed companies, according to Nasscom President Som Mittal. “The markets are really closed,” says Mittal, who wants Indian officials to make improved access a priority in talks with Chinese leaders.

In the fiscal year ending March 2011, China exported $43.5 billion in goods to India, up from $10.9 billion in 2006, according to India’s Ministry of Commerce and Industry. India’s exports to China were only $19.6 billion, up from $6.8 billion in 2006. Cheap Firefox bicycles are ubiquitous in New Delhi. Technically, it is an Indian brand—except the bikes are made almost entirely of Chinese components. Chinese-made phones and telecom equipment “have flooded the Indian market,” says Srikanth Kondapalli, a professor at the Centre for East Asian Studies at Jawaharlal Nehru University in New Delhi. “There is no reciprocity for Indian products.”

The surge of cheap goods has led some Indian executives, like their U.S. counterparts, to say government-aided Chinese rivals are undermining India’s industrial base. “Without a duty to control Chinese imports, we will continue to lean on cheaper, unproven equipment instead of building our own technology and our own industry,” says B. Prasad Rao, chairman of Bharat Heavy Electricals. The $13 billion New Delhi-based producer of power equipment is struggling to compete against lower-priced products from Shanghai Electric and Dongfang Electric. Chinese-made power equipment, such as steam turbines and boilers, is about 20 percent cheaper than equivalent Indian products, according to Ashok Khurana, director-general of the Delhi-based Association of Power Producers. “The Chinese are very shrewd marketing people and we know our side is full of suckers,” says Subramanian Swamy, president of the Janata political party and Minister of Commerce in 1991, when India signed its first free trade agreement with China.

Two months prior to the August bankruptcy of Solyndra, which highlighted the inability of U.S. solar panel makers to compete with the Chinese,Indosolar ( ISLR:IN), India’s largest maker of solar cells, defaulted on $56 million in bank loans. “China’s doing a spectacular job of keeping India’s economic growth under its thumb,” says L.R. Shrivastav, chief executive officer of Moser Baer Power & Infrastructure, another Indian solar panel producer. The Indian government may join a U.S. complaint to the World Trade Organization targeting alleged dumping by Chinese solar companies.

To keep a closer eye on dumping and government-subsidized bids for domestic contracts, India’s Department of Commerce will launch the Directorate General of Trade Remedies this spring, according to two government officials who spoke on condition of anonymity. Forty-four of India’s 69 active antidumping cases before the WTO are against Chinese industries, according to the international trade body. “Manufacturers are afraid and want barriers,” says Biswajit Dhar, director-general of Research and Information Systems for Developing Countries, a New Delhi-based think tank. “Either we’re trying to block them or we’re getting pummeled by them.”

Source : businessweek.com