Dump Pricing in India

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Dumping is the process of charging a reduced price for the similar or same product in foreign market than the actual value of the product. 
It is a type of price discrimination in which the exporter sells the goods at a lower price in the third market and at normal prices in the home country at the same time during the same circumstances.
A commodity is said to have dumped when:
  1. The commodity is exported at a lower price than its actual price, or
  2. The exported price of the commodity is lower than the final consumption price in the exporting country.
The reasons for dump pricing may be any or all of the reasons mentioned below:
  1. To establish a foreign market
  2. Sale of surplus goods
  3. Develop new trade relations
  4. Expansion of internal and external economies of scale.
Impacts of dumping in India:
The industry to which the dumping commodity belongs, incurs a loss in the importing country. Hence this affects the market conditions and domestic market demand and supply. To produce goods at par with the dumping commodity, the importing country needs to change the technique of production which is a capital change and is not only time consuming but also monetarily expensive. By then, exporting country has already found a good market share. This could threaten the market nature and make it a monopoly, exploiting consumer welfare, etc Also low tariff rates could motivate the exporting country to continue dumping. 
If the market of the dumping product follows a law of diminishing marginal returns, the costs will increase making the commodity costly. On the other hand, if the commodity follows law of increasing returns, the cost will reduce resulting into higher profits. The exporting country sees a rise in production of the commodity leading to increase in employment and improved balance of trade. It can be observed that the exporting country is at an advantage in the process of dump pricing.
India has turned a dumping ground for steel by countries like China, Japan and South Korea. To guard this, India has imposed anti-dumping tariff of up to USD 185.51 per tonne for five years on Chinese steel.  India also imposed anti-dumping tariff ranging from USD 6.30 to USD 351.72 per tonne on imports of jute and its products from Bangladesh and Nepal.
Thank You
Regards
Author: Kaushal Shah
Kautilya 
IBS Mumbai

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