The manufacturing world, including plastics, had high expectations for Indian Prime Minister Narendra Modi when he came into office last year.
But the Indian government's recent decision to continue for another five years its anti-dumping duties on Chinese made injection molding machines calls into question, for me, how committed Modi's government really will be to making tough decisions that could help its plastics industry grow long-term.
The decision to continue the tariffs will certainly help India's plastics injection molding machinery industry, but it will also hurt the customers of those equipment makers, the plastics injection molding industry.
China is home to the world's largest plastics machinery industry, much larger and more developed than India's.
In building a wall around itself, India is making it harder for its domestic molding companies to get access to the full range of equipment they need to compete in world markets.
It's apparently not just Chinese imports that have India worried.
After slapping tariffs on China in 2009, India's government in 2014 announced it was studying whether it should put similar punitive tariffs on injection molding machines from Taiwan, Vietnam, Indonesia and the Philippines.
It's like India is saying that it has to protect its domestic machinery industry from everyone, or at least all the other Asian mid-range producers.
Austria's Engel Holdings GmbH, one of the world's largest and most globalized makers of injection molding machines, told the Indian government that demand for high-performance machines will increase as India pursues its “Make in India” program to upgrade manufacturing.
Engel was lobbying the Indian government to exempt injection molding machines from its China factories from the duties.
Clearly Engel is pursuing its own interest in seeking the exemption, but it was also making a broader argument that I think is valid, that the tariffs will limit the choice of technologies available to Indian molding companies.
“Customers who require this value addition are prepared to pay the premium, but again to pay on top anti dumping duty is very difficult for the customers,” Engel said. “Engel would like to export machines … from China but due to the antidumping duties it is quite impossible to do so.”
Engel has not commented publicly on the case. I took those words came from a summary of Engel's submissions to the Indian government, as noted in the India's Ministry of Commerce & Industry public announcement of its decision.
Some Indian industry groups, like the All India Plastics Manufacturers' Association, make the same argument. AIPMA would like the duties canceled because India's small and medium-sized manufacturers “should have access to economically priced technology.”
“The antidumping duty on the injection molding machines should be phased out … in view of facilitating new investment in the segment,” AIPMA said in its 2015-16 goals for India's budget.
There's a tradeoff in these decisions, and India's government so far seems unwilling to acknowledge that. It can't protect its local machinery industry without hurting its local molding industry.
Prime Minister Modi was in the United States in late September, where he was hosted by Facebook CEO Mark Zuckerberg at the company's California headquarters.
India has some tech powerhouses, Modi was playing to that, and it has some plastics manufacturing powerhouses that compete globally, companies like Motherson Sumi Systems Ltd. and Essel Propack Ltd.
But it also has a LOT of smaller, not well capitalized firms. Decisions like this suggest that in manufacturing, at least, Modi's government may fall short of the hype about transforming the business climate and taking the shackles off Indian industry.
