India raised import duty on a range of items as Government seeks to rein in the current account deficit and shore up the rupee.
The move follows an announcement to this effect by Finance Minister Arun Jaitley earlier this month after a meeting with Prime Minister Narendra Modi in the wake of the slump in the rupee against dollar. Basic customs duties have been raised on 19 tariff lines that accounted for an import bill of Rs 86,000 crore in FY18 by 2.5-10 percentage points.
The moves came into effect from 27th September, Thursday, a Finance Ministry release said.
“The Central Government has taken tariff measures, by way of increase in the basic customs duty, to curb import of certain imported items,” it said. “These changes aim at narrowing the current account deficit (CAD).”
The prices of all these goods are expected to rise, dampening demand, lowering imports and helping local manufacturers. The increased duty is likely to yield about Rs 4,000 crore in revenue.
“The hike in import duty on the identified non-essential items is likely to have a modest impact on curtailing the size of the current account deficit in FY2019, which we currently estimate at around 2.8% of GDP,” said Aditi Nayar, Principal Economist, ICRA Ltd.
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. Given the uncertain global environment, emerging economies running high current account deficits have seen their currencies depreciate sharply amid interest rate increases by the US Federal Reserve, higher crude prices and an intensifying global trade war. The Indian rupee is down about 13% since January.
“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 September 14. The advice of a committee headed by cabinet secretary PK Sinha tasked with identifying sectors that had been hurt by cheaper imports was also taken into account before deciding on the measures.
Source :- Dailyshippingtimes.com