India’s policy firepower shields firms from China dumping threat, says Carnelian’s Vikas Khemani

India’s policy firepower shields firms from China dumping threat, says Carnelian’s Vikas Khemani

India is unlikely to be a victim of Chinese dumping, even as the global overcapacity debate intensifies, says Vikas Khemani, founder of Carnelian Asset Advisors. In an interview with N Mahalakshmi on the "Wealth Formula", Khemani said that the Indian government has grown “very smart in navigating” trade risks and is actively using tools like BIS standards and non-tariff barriers to protect domestic industries.

“China has always had overcapacity—they could have dumped earlier too,” he said. “They were not able to, not because the capacity wasn’t there, but because of India’s policy approach.”

He cited examples such as the footwear and toy industries, where the government’s use of BIS norms significantly curtailed imports and enabled local manufacturing to scale up. “Now, every large company is putting large-scale manufacturing facilities [in India], and that’s creating huge employment,” Khemani said, noting this is happening across sectors like sports footwear in Tamil Nadu.

On being asking about period in the past when Indian industries including smaller ones like tiles and bigger ones like steel suffered due to Chinese dumping, Khemani argued that those were periods of deliberate policy calibration rather than lapses. “If that time there was no protection for steel, that was a message to Indian steel industry. Government takes a very consolidated approach -- it's not that they are deciding in isolation,” he said.  “They need to know how much domestic industry needs to be protected and not to be protected, because ultimately, you should not have, blatant protectionism by which your industry becomes inefficient.” But in the current situation, “Why would the government not want to protect its own industries in this environment” he asked.

Even if global growth slows and excess Chinese capacity seeks new markets, Khemani believes India’s domestic growth momentum will continue. From a markets lens, he doesn’t see a major earnings risk from dumping. India will grow by gaining market share from other countries, Khemani believes. “India will gain market share. So we will have good enough growth. And hence, Indian capex will not go out,” he said.

He also sees potential for a global investment rebound once the Fed cuts rates further. “At 2–3% Fed rates, you could see US infrastructure spend revive,” Khemani said. “It may take 2–3 quarters of pain before it begins, but the path is clear.”