Here’s why Chinese goods are cheaper

I’ve been seeing a ton of memes on my timeline appealing to people not to buy China made crackers and lanterns. The sole reason why goods sourced from China are cheaper is because it costs them less to produce their goods. So they can sell them for less. This raises the question, why are Indian goods more expensive to produce as compared to Chinese? It’s because the government doesn’t do its job. It’s because we are at a disadvantage in terms of all four factors of production: land, labor, capital and enterprise. When you leave your office in a city like Mumbai, it is torture to get to work. Depending on your social status, you could be stuck in a second class Churchgate local or in a luxury sedan on the way to your corner office at BKC. Traffic snarls are an equalizer due to the poor infrastructure. This wastes time that could be spent productively. You also guzzle more fuel which adds to the production cost of whatever you produce directly or indirectly, whether as an entrepreneur or labor. Taxes in our country are ridiculously high. Millions of people are waiting excitedly for Goods and Services Tax (GST) to be introduced but GST will only add to inflation. Many small businesses may not be able to claim set off because anything to do with the Indian government is fraught with red tape, if history is anything to go by. Also, while the initial rate may be 18%, it may be revised upward anytime. Service tax was 5% in 2003. It’s now 15%. That should tell you something. You can’t trust the Indian government when it says this will be the sole tax, either. A different government will just shrug off any assurances given by this one. Inflation is high and if you believe the 6% figure that the government claims please inbox me. I have a bridge I want to sell you. Corruption and red tape also increase production costs. If a builder has to give bribes to get permissions for his project, he will factor in this in the selling price. Anyone who invests in a commercial premises built by the builder will ask for rent based on his investment. A company that takes it on rent will factor in the rent in its products. Now whether they are producing apparel or furniture or running a poultry farm, their products will be expensive because the builder had to bribe someone. Businesses continue to need permissions and licenses from various government bodies. All this red tape adds to corruption and increases inflation. It also leads to inefficiency. Loans are hard to get for small entrepreneurs while big businesses get their billions easily. Businesses and individuals have to waste a lot of time that would be better spent on productive activities. Ask any student how long it takes to sign up for a course on the Mumbai University website or to look up results. Ask tax payers how tedious it is to register for tax, get an importer exporter code or incorporate a company. Why are our government websites so slow, unreliable and vulnerable to being hacked? Why should the productive time of millions of people be wasted because the government can’t ensure dependable technology solutions? So, stop whipping yourself. Chinese products are always going to be cheaper till the government gets its act together. It’s not you. It’s them!

Leave a Reply

Your email address will not be published. Required fields are marked *