Rationalisation of import duty
Importing anything into India, whether it is lithium for the batteries that run our electric cars or the wool from which our winter wear is made, is more often than not a nightmare, given the plethora of duty slabs and interpretation of rules. Not to mention an inverted duty structure for many goods, which sometimes makes it costlier to import parts than the finished product.
We believe that the finance ministry is contemplating much-needed reforms to reduce the number of customs duty slabs and to follow the principle that raw materials should be taxed lightly as they go into our production while finished goods should be taxed at a higher rate to afford protection to domestic manufactures. Of course, there are raw materials like aluminium and tin sheets where lower duties would spell disaster for local investments and jobs. These are exceptional cases.
The general rule followed by the rest of the world of a pyramidical duty structure with lowest rates for raw material should hold true for us too. That said, we should not turn the imposition of duties in the name of Atmanirbhar into a fetish as we did in the name of import substitution, in the 1960s and 1970s. New technology was discouraged and imports became an albatross for businesses during those misguided Socialist days. The result was that, among other anomalies, we were stuck with just three brands of cars whose technology was 15-20 years old.
The liberalisation that the then PM P V Narasimha Rao and his celebrated Finance Minister Dr Manmohan Singh wrought with great difficulty ended all that in the 1990s and we saw the automobile industry flourish, along with a whole host of others. Consumers benefited immensely as prices came down, even as the economy boomed.
While reforms are needed and local industries must be protected against predatory global pricing, we also need to guard ourselves against old habits that saw India locked into technological obsolescence and a low growth trap. ‘Make in India’ should not be an excuse for high-priced or low-quality products being protected from necessary competition from the rest of the world.