India Goes In For Preemptive Trade Surveillance

Top officials in the Commerce Ministry said the government has decided in favour of heightened surveillance, spearheaded by an inter-ministerial committee comprising representatives from four key agencies, which signals a significant shift towards a more preemptive approach to trade management.

This committee, set up by Commerce Secretary Sunil Barthwal, is designed to act as an early warning system, identifying potential dumping threats before they can inflict substantial damage.

The government's explicit acknowledgment of the risk of merchandise dumping, fueled by the cascading effects of global trade tensions, underscores a recognition that India, despite its growing economic stature, remains vulnerable to the fallout of major power trade disputes.

The inter-ministerial committee for import surge monitoring has representatives from department of commerce, Directorate General of Foreign Trade, Department for Promotion of Industry and Internal Trade, and Central Board of Indirect Taxes.

The core of India's concern lies in the logical economic response of nations facing increased tariffs in one major market (the US) to seek alternative destinations for their goods. "Our job will be to spot ahead of a movement in goods trade of our vulnerable areas and then to see to it that as trade dynamics change, we are proactive in plugging loopholes which willallow dumping or re-routing to occur," said officials.

Intensive Scrutiny

India's recent intensification of scrutiny over potential import surges from nations like China, Vietnam, and Indonesia is not merely a reactive measure but a calculated strategic response to the profound realignments occurring in the global trade arena, primarily triggered by the United States' assertive reciprocal tariff policies, which have seen effective tariffs on China soar by an estimated 234 percentage points to 245 per cent. 

This proactive stance reflects a deeper understanding of the potential for trade diversion and the consequent risk of dumping, which could severely undermine India's domestic manufacturing sector and broader economic stability.

China, being a primary target of US tariffs potentially reaching 245 per cent, along with Vietnam facing 46 per cent and Indonesia at 32 per cent, are naturally inclined to explore markets with relatively lower barriers. India, with its large and growing consumer base and a US-imposed tariff of 26 per cent, presents an attractive alternative.

However, this attractiveness also makes it a potential target for a flood of cheaper imports, some of which may be priced below their cost of production — the very definition of dumping.

The committee's mandate to monitor import trends weekly and monthly highlights the urgency and granularity of India's approach. This detailed tracking aims to identify not just overall increases in imports but also sudden spikes in specific commodities from particular countries, which could be indicative of dumping practices.

"The government's active efforts to block the re-routing of Chinese goods through India to the US further demonstrate a commitment to preventing circumvention of international trade rules and protecting its own economic interests," an official nominated on the committee said.

China Dropping Prices

The historical context of China's successful re-routing of commodities worth over US$ 1 trillion during the previous US tariff regime, as noted by the Global Trade Research Initiative, serves as a potent reminder of the potential scale and complexity of this challenge. India's current proactive measures are therefore informed by this past experience, aiming to close potential loopholes and strengthen its defenses against unfair trade practices.

An analysis by Capital Economics provides a crucial global perspective on this issue. Their prediction that a 60 per cent tariff could potentially cut Chinese imports to the US by "about a third" over "the next two years", leading to a search for alternative markets, validates India's concerns.

The report also notes a 20 per cent drop in China's export prices over the past two years, indicating their willingness to absorb some tariff costs. Furthermore, they estimate that a 70 per cent reduction in China's exports to the US could cause a 10 per cent drop in its total world exports, meaning US$ 315 billion worth of goods (based on last year's US$ 525 billion US imports from China) might seek new destinations.

The stark wage cost difference, with China's manufacturing wages being "about a fifth" of those in France, underscores China's competitive edge.

India's trade data for the fiscal year 2024-25 reveals a mixed picture. While overall exports grew by a healthy 5.5 per cent to reach US$ 820.93 billion, merchandise exports saw a modest increase of just 0.08 per cent to US$ 437.42 billion.

Imports, Deficits Rising

Simultaneously, imports surged by 6.62 per cent to US$ 720.24 billion, resulting in a significant trade deficit of US$ 282.82 billion. In March 2025 alone, the merchandise trade deficit widened to US$ 21.54 billion from US$ 14.05 billion in February, with imports rising by a substantial 11.4 per cent year-on-year to US$ 63.51 billion, compared to exports of US$ 41.97 billion.

This widening trade deficit, up from US$ 15.34 billion in March 2024, in the face of potential import surges from countries facing US tariffs underscores the urgency of India's increased vigilance against dumping.

Jennifer McKeown, Chief Global Economist at Capital Economics, anticipates that the surge in US tariffs against China will exacerbate existing trade tensions. While some economies, including India, might see some gains in US market share, these benefits could be counterbalanced by the pressures of a flood of cheap imports from China as it seeks to maintain its global market share.

India's heightened scrutiny on imports, particularly from China, Vietnam, and Indonesia, reflects a proactive and data-informed approach to safeguarding its domestic industries amidst the turbulent global trade environment.

The government's inter-ministerial committee is closely monitoring the situation, ready to take necessary actions to prevent dumping and ensure fair trade practices.

As the world watches the unfolding trade dynamics shaped by US tariffs and China's response, India's strategic vigilance, backed by concrete data analysis, will be crucial in protecting its economic interests and maintaining a level playing field for its domestic manufacturers.

(Author is a well-known economic journalist and analyst. Views are personal)