India has drawn up a list of over 35 items that are being examined for a possible customs duty increase in the upcoming budget, scheduled to be announced on February 1.
Private jets, helicopters, high-end electronic items, plastic goods, jewellery, high-gloss paper and vitamins are among items that are on the list prepared by the government. “A list has been drawn up based on the inputs from various ministries that are being examined,” said a government official. The move is aimed at curtailing imports and also to encourage local manufacturing of some of these products.
The commerce and industry ministry had in December asked various ministries to ready a list of non-essential items, imports of which need to be discouraged through import tariff hike.
India’s current account deficit (CAD) rose to a nine-year high of 4.4% of GDP in the quarter ended September from 2.2% of GDP in the preceding quarter.
A fall in global commodity prices may have eased some worries over the widening CAD, but policymakers want to be cautious.
Exports are expected to be under pressure in FY24 following demand contraction in advanced economies. Economists see CAD at 3.2-3.4% of GDP in the next fiscal. “With local demand set to outpace export growth, the merchandise trade deficit could remain at $25 billion per month, translating into a CAD of 3.2-3.4% of GDP,” said chief economist Aditi Nayar.
Part of long-term strategy
Policymakers are also keen to discourage the import of non-essential goods as part of the long-term strategy to encourage local manufacturing.
New Delhi has for the past few years raised customs duties on several goods to back its Make In India programme launched in 2014, and subsequently to support the Aatmnirbhar Bharat plan to boost domestic production.
The government had in the FY23 budget raised import tariffs on a host of items including imitation jewellery, umbrellas and earphones to encourage local manufacture. Import tariffs on gold were raised in 2022 to curtail imports of yellow metal.
Quality control orders
The government has also issued quality control orders to curb non-essential cheap imports. “Goods already being manufactured in the country are being considered,” said the official cited above.
Various measures, including increases in import tariffs, have for instance helped the country curtail the import of toys by 70%. That’s aided the country’s export of toys which increased 240% to ?2,706 crore in 2021-2022 from ?797 crore in 2014-2015.
