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$12 billion worth Chinese imports under government lens; customs duty may be hiked

As India considers steps to curtail cheap and substandard imports from China, it is set to start with raising basic customs duties on dozens of products. This would be followed up with non-tariff measures, such as standard specifications for hundreds of items, in the medium term, sources told FE. Though the move is not patently China-specific and will apply to imports of the specified items from any country, the brunt of the decisions will be borne by China.

The government is considering a list of 1,173 items — ranging from auto parts, compressors for AC and refrigerators to select steel and aluminium products and electrical machinery — to zero in on products/ sub-products on which the import duties can be hiked. These items are mostly imported from China and can be substituted with local production without much hassles, one of the sources said.

Imports of these 1,173 items from China were worth $11.98 billion in FY19, making up for just 2.3% of India’s total imports that year but 17% of New Delhi’s purchases from Beijing. However, imports of only 47 of these products/sub-products from China were worth over $50 million each in FY19, totalling $5.82 billion.

The idea is not just to punish China for its latest border misadventures but also boost local output and substitute imports, in sync with Prime Minister Narendra Modi’s push for Aatmanirbhar Bharat.  While any such duty hike is unlikely to be Beijing-specific, the move will hurt China the most, as it’ is the biggest supplier of such cheap and low-grade products to India.

Nevertheless, analysts have questioned the efficacy of any such duty hikes, saying that targeting mostly small products will hardly yield anything. Beijing can always raise subsidies on these items, which can blunt the Indian tariff hike.

However, an official source argued that “every great journey starts with a single step” and Beijing must know that “its action carries a cost”. “Not taking any retaliatory step will only embolden China. We are not saying any one of these moves will hit China hard. For this to happen, a comprehensive strategy will have to be devised, and it’s being devised to substitute imports, wherever possible,” the source said.

Even before the Budget for FY21 was tabled, the commerce and industry ministry had suggested that customs duties on as many as 300 products, including footwear, furniture, TV parts, chemicals and toys, be raised, as part of a broader crackdown on what it considered “non-essential” imports. However, the latest border clash with China only hardened India’s resolve to target the neighbour economically and move towards self-reliance with a renewed sense of urgency.

The Budget had announced a hike in import duties of over a dozen products — including toys, furniture, footwear, electronic goods and e-vehicles — by up to 40%. A decision on rest of the items would be made soon. As for non-tariff measures, as FE has reported, standards for 371 products, with total imports of as much as $128 billion in FY19, are being firmed up or reviewed urgently. These items include steel, consumer electronics, heavy machinery, telecom goods, chemicals, pharmaceuticals, paper, rubber articles, glass, industrial machinery, some metal articles, furniture, fertiliser, food and textiles. This, too, was part of the instruction by commerce and industry minister Piyush Goyal to the Bureau Of Indian Standards (BIS) in December 2019 to develop standards for over 4,500 products (HS lines). Financial Express

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