Faced with a steadily widening current account deficit (CAD) and a sliding rupee, the center on Wednesday hiked import duties on 19 non-essential items ranging from gems and jewelry to aviation turbine fuel (ATF), following through on the measures announced following the Prime Minister’s economic review meeting last week.
“The central government has taken tariff measures, by way of increase in the basic customs duty, to curb import of certain imported items. These changes aim at narrowing the current account deficit (CAD),” the center said.
However, it has not imposed import curbs on gold and steel, both of which were touted as candidates that could attract tariff hikes. The new import duties have gone into effect from September 27.
According to the government’s statement, duties have been raised, or imposed, on 19 products: air conditioners, household refrigerators, washing machines, compressors for air conditioners and refrigerators, speakers, footwear, radial car tyres, various gems and jewelry products, plastic goods, luggage carriers like suitcases etc, and ATF.
While ACs, refrigerators, and washing machines have attracted a doubling of customs tariffs from 10 percent to 20 per cent, other items have seen an increase of 2.5 to 5 percent. The customs duty on ATF has been increased from nil to 5 percent.
The 19 items together accounted for Rs 86,000 crore worth of imports in 2017-18.
India’s trade balances have been placed under considerable stress over the last few months, as the Indian currency continued on its steady slide, exacerbated by the parallel strengthening in crude oil prices and a general outflow of funds from emerging markets. The combination of factors saw the country’s CAD widen to 2.4 percent of the GDP in the first quarter of 2018-19. According to available data, merchandise trade deficit in the April-August 2018 period stood at USD 80.35 billion compared to USD 67.27 billion in the same period last.
The government has already taken a few measures earlier this month to stem the slide of the rupee. These measures were primarily focused toward attracting capital flows, with mandatory hedging conditions for infrastructure loans eased, allowing manufacturing firms to avail external commercial borrowings up to USD 50 million with a minimum maturity of one year versus the earlier period of three years, etc.
The Indian rupee closed at Rs 72.60 per US dollar on Wednesday, having recovered mildly (9 paise) from its previous close. However, the currency had depreciated 49 paise over the last two days.― New Indian Express