Global Economy

Import curbs on non-essential goods may be declared this week

NEW DELHI: India is likely to unveil steps to curb imports of several non-essential items such as steel, furniture, electronic items and consumer durables this week. Food items such as nuts and fruits could also be on the list.

The government has identified restrictions on non-essential imports as one of the ways in which to rein in the current account deficit and reduce pressure on the rupee. The products have been identified based on the recommendations of a committee headed by cabinet secretary PK Sinha that was looking into India’s imports.

“Measures are in the works… Committee chaired by the cabinet secretary has identified the sectors on which import tariffs need to be raised,” said a government official. To begin with, customs duties on identified goods could be raised. Gold, which already faces a basic customs duty of 10%, could be spared this time around or see just a modest rise, as an increase can lead to greater smuggling.

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 expanded to $80.4 billion in the first five months of the current fiscal year from $67.3 billion in the year-earlier period. In the current global environment of rising crude prices, fears of an escalating trade war and higher US interest rates, countries running a wide current account deficit have faced sharp currency depreciation. The higher duties will also offer some protection to domestic producers.

Domestic industry, especially sectors such as steel, non-ferrous metals and consumer durables, has already lobbied against the onslaught of imports especially under free trade agreements and sought the imposition of safeguard duties or higher import duties. Certain food items that account for high imports could also face restrictions. Some policymakers within the government feel that when protectionism is on the rise globally, India should not hesitate in providing some assurance to its domestic industry while also cutting imports of non-essential goods.

The government is also looking to expand the phased manufacturing plan—moving an increasing proportion of work to India in incremental steps–to include some sections of the consumer durables industry. India imported nearly $2 billion of finished televisions, washing machines, refrigerators, vacuum cleaners, digital cameras and mixer grinders in FY18. Moreover, these imports have been rising rapidly–up 35% in FY18. Mobile phone imports touched $3.5 billion.

Finance minister Arun Jaitley said Friday that the government will announce measures to restrict non-essential imports. He had said the items would be identified in consultation with stakeholder ministries and departments.


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