Min­i­mum Im­port Price Among Op­tions to Curb Non-es­sen­tial Goods

Move seen as more ef­fec­tive than rais­ing du­ties to cut CAD

The Economic Times - - Economy: Macro, Micro & More - Deepshikha.Sikar­war@ times­group.com Coun­try­wide rain­fall since June 1 re­mained 9% be­low nor­mal

New Delhi: In­dia could look at im­pos­ing min­i­mum im­port prices or safe­guard du­ties on some goods as it at­tempts to cut nonessen­tial im­ports and com­press the cur­rent ac­count deficit to halt ru­pee de­pre­ci­a­tion.

Th­ese mea­sures are seen to be more ef­fec­tive than sim­ply rais­ing du­ties, which leads to goods be­ing routed via coun­tries with which In­dia has free trade agree­ments (FTAs), or out­right bans that run afoul of the World Cashews 2564 Al­monds 884 Ap­ples 252 Whisky etc 323 Wa­ter 115 Mar­ble 249 Tyres 481 Leather items 441 Cot­ton, wool, silk 1777 Man-made fi­bre 1582 curbs on non-es­sen­tial im­ports to check deficit Tex­tiles** Footwear Glass* Iron & Steel Cop­per* Alu­minium* Mo­biles Fur­ni­ture Plas­tic* 1234 687 1245 14638 4,507 4,523 3,537 1,876 13,926 FTA route af­ter do­mes­tic du­ties were raised.

Fi­nance min­is­ter Arun Jait­ley had on Fri­day, af­ter a cru­cial re­view meet­ing of the ex­ter­nal sec­tor by Prime Min­is­ter Naren­dra Modi, said that the gov­ern­ment will take steps to re­strict im­ports.

“The list of non-es­sen­tial items will be de­cided in con­sul­ta­tion with the con­cerned min­istries to en­sure that the mea­sures we take are in con­so­nance with our obli­ga­tions un­der the mul­ti­lat­eral trade agree­ment of the World Trade Or­gan­i­sa­tion,” Jait­ley had said on Fri­day.

In­dia’s cur­rent ac­count deficit de­te­ri­o­rated to 1.9% of GDP in FY18 from 0.6% in the year be­fore and is fore­cast to rise to around 2.8% in the cur­rent year. The trade deficit has widened to $80.4 bil­lion in the first five months of the cur­rent fis­cal year from $67.3 bil­lion in the same pe­riod last year. The gov­ern­ment had im­posed cus­toms duty on smart­phones in July 2017 and sub­se­quently raised it in the bud­get. Cus­toms duty was raised on a host of goods such as in­puts used in mo­bile phones and other hard­ware, watches and fruit juices.

Indian in­dus­try has also been com­plain­ing of the dump­ing of iron, steel, cop­per and alu­minium, and im­pos­ing min­i­mum im­port prices will cool de­mand. Iron and steel im­ports rose 25% in FY18, cop­per by 33% and alu­minium was up 30%. In­dia im­ported mo­bile phones worth $3.5 bil­lion in FY18. Re­strict­ing im­ports to a port can slow down ship­ments.

Tax ex­perts say a more long-term so­lu­tion lies in re­view­ing FTAs. “In­creases in cus­toms duty on im­ports by sec­tors or of spe­cific goods in the past few months has had an in­signif­i­cant im­pact on the quan­tum of im­ports as many of them are im­ported un­der FTAs,” said Rahul Shukla, ex­ec­u­tive di­rec­tor, PwC. “Hence, the gov­ern­ment may want to re­view con­ces­sions given as part of FTAs, the In­for­ma­tion Tech­nol­ogy Agree­ment si­mul­ta­ne­ously and use con­sul­ta­tive or re­me­dial mea­sures as part of th­ese agree­ments while con­tin­u­ing to fo­cus on ini­tia­tives for Make in In­dia in­clud­ing in­fra­struc­ture and con­nec­tiv­ity.” Cus­toms duty was raised on gold in 2013 to cut im­ports of the metal.

In­dia’s cur­rent ac­count deficit de­te­ri­o­rated to 1.9% of GDP in FY18 from 0.6% in the year be­fore and is fore­cast to rise to around 2.8% in the cur­rent year

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