“We have made China supply low quality goods by bargaining on the price”

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Delhi, which houses Asia’s biggest electronics market and distribution network, has been facing stiff competition from cheap Chinese products. In a conversation with Nitasha Chawla of Electronics Bazaar, Rakesh Arora, vice president, Central Radio and Electronics Merchants Association (CREMA), talks about the role of the association and the issues faced by traders of electronics goods in Delhi.

EB: How is the electronics B2B industry doing in the northern region?

The region is doing well. The only issue it is facing is the increasing competition from Chinese products. The Indian electronics industry is going down because of more and more products coming in from China. Be it consumer electronics or other industrial electronics items, everything is facing competition from China. The amount of business done from Delhi is high. This makes it a very competitive market. Delhi is home to one of the biggest electronics market in Asia, which is the Lala Lajpat Rai Market. Here, the buyers get a lot of choice for all sorts of electronics goods.

EB: What are the advantages Delhi offers to the electronics manufacturers vis a vis other regions?

Delhi basically has a distributive character. Being a city, its own consumption is less compared to other states. Most of the items are manufactured somewhere else and then distributed all over India from Delhi.

EB: What is the role of CREMA in the electronics industry?

We are basically dealers and distributors of electronic goods and we are not here to influence the industry through the association. Our main concern is to address issues faced by members of the association, like VAT issues. Most of the items in the electronics industry are highly taxed. Therefore, as and when the government announces any hike in the VAT, we take up the issue with the VAT commissioners on behalf of all the members.

Recently, there were certain changes made in the VAT on the exports to other states from Delhi. Delhi government had proposed that if firms sell anything outside Delhi at 2 per cent, they pay a 12.5 per cent VAT to the manufacturer but will get a credit of 10.5 per cent, which means that the 2 per cent difference has to be borne by the firm. This increases the cost for the seller. But this proposal is in cold storage now because the industry associations have protested.

EB: What, according to you, can India do to compete with China?

First, we need to change our Indian labour laws. We should have a ‘hire and fire policy’ and not the protected laws that we have at the moment. Another very important thing to do is to weed out corruption and the red tape from our system. Only then will our industry be able to compete with China.

EB: And what can India do to cut down on electronics imports?

Imports can only be cut down once we start domestic production on a bigger scale but we don’t have an ecosystem for that in India. We are not able to compete with China on price, our manufacturing costs here are very high, and we have made China supply low quality goods by bargaining on the price. China is supplying to the US and Europe as well, but the quality delivered to them is superior because they don’t bargain on prices.

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