Government to hike import duty on goods that can be manufactured in India

“Why would you import something which can be produced in the country,” said a finance ministry official.
For representational purposes.
For representational purposes.

NEW DELHI: Countering the recent criticism of rising protectionism, finance ministry officials on Thursday said that the government will increase the customs duty or keep it high on those items that can be domestically manufactured to meet the local demands.

They said that it is a conscious policy decision of the government under the Atma Nirbhar policy. “Why would you import something which can be produced in the country,” said a finance ministry official.
Many policy analysts and economists have raised concern over growing protectionism in India and elsewhere. Recently, former Niti Aayog vice-chairman Arvind Panagariya in a newspaper column said that 2018-19 saw a marked shift in India’s policy from liberalism to protectionism.

Finance ministry sources said that the decision to hike customs duties on certain items is taken after proper assessment considering various factors, and is not done indiscreetly like in the previous regimes. The ministry officials also linked the decision to levy higher customs duty on certain goods to the concerns raised over high imports from China. Without naming China, an official said that one of the considerations for increasing customs duty on certain goods is if they are being imported largely from one particular country.

Meanwhile, on the issue of a higher current account deficit, the finance ministry officials said that with crude oil and fertilizer prices going down, and higher import duty on gold, the current account deficit should come down.

When asked if the US Fed tightening its monetary policy would have a severe impact on India, the finance ministry officials said that both the ministry and the Reserve Bank of India (RBI) are keeping a close watch on the Fed’s move. They said that so far India has not faced any serious problems on that front. An official said that unlike the US taper tantrum in 2013, when India was caught off guard, this time India is keeping a close watch on the situation.

On freebies, the finance ministry officials suggested that as long as one provides for the fund in the budget, it is okay. “I am okay with a state government giving free electricity to farmers or the poor, but they should provide it in the budget as part of responsible governance,” said one official.

Gauging the mood in the finance ministry

  1. An increase in import duty on certain goods is a conscious policy decision under Atma Nirbhar Bharat.
  2. The government will increase import duty on goods that are sufficiently manufactured in India to meet local demand.
  3. The current account deficit is likely to come down with global prices of crude oil, and fertilizer coming down.

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