In­dia Must Lower, Not Raise, Tar­iff Walls

The Economic Times - - The Edit Page -

In an in­ter­view to this newspaper, Niti Aayog’s out­go­ing vicechair­man Arvind Pana­gariya has rightly pitched for low­er­ing In­dia’s peak Cus­toms duty to 7% from10%. Res­tart­ing the re­form, that be­gan in 1991 but got stalled af­ter 2007-08, will en­hance the qual­ity of our do­mes­tic pro­duce, make our prod­ucts more com­pet­i­tive in the in­ter­na­tional mar­ket. The ideal goal is a uni­form im­port duty on raw ma­te­ri­als, in­ter­me­di­ates and fi­nal prod­ucts, to give all lines of value ad­di­tion the same ef­fec­tive rate of pro­tec­tion. But there is a slide to­wards pro­tec­tion now with the gov­ern­ment im­pos­ing anti-dump­ing du­ties on as many as 93 prod­ucts — steel, me­tals, chem­i­cals and petro chem­i­cals, elec­tric and elec­tronic items and con­sumer goods. True, a strong ru­pee makes im­ports rel­a­tively cheap. But rais­ing tar­iff walls would breed do­mes­tic in­ef­fi­ciency and trig­ger re­tal­i­a­tion by trad­ing part­ners.

Sim­i­larly, other moves such as levy­ing an im­port duty on mo­bile phones to pro­tect do­mes­tic phone-mak­ers or on 4G equip­ment im­ported by tele­com firms in the GST regime is un­likely to ad­vance Digital In­dia. The gov­ern­ment’s po­si­tion that 4G equip­ment does not fall within the ITA-I agree­ment where In­dia has com­mit­ted to waive du­ties is tech­ni­cally cor­rect, but poses a chal­lenge in im­ple­men­ta­tion. Con­tin­u­ing with zero im­port du­ties on all tele­com and IT prod­ucts while treat­ing lo­cal pro­duc­tion as deemed ex­ports and re­im­burs­ing the GST they pay is a su­pe­rior way to pro­tect do­mes­tic man­u­fac­tur­ers as com­pared to rais­ing tar­iff walls. In­dia has wel­comed the WTO’s trade fa­cil­i­ta­tion agree­ment for cross-bor­der com­merce in goods, and rightly pressed for a sim­i­lar agree­ment of ser­vices, given its com­par­a­tive ad­van­tage in ser­vices. How­ever, to press home this ad­van­tage, In­dia should be ac­com­moda­tive in the goods mar­ket.

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