In the middle of a strong push for self-reliance, the government has tightened its scrutiny of imports in over a dozen segments, which includes air conditioners, leather, footwear, agro-chemicals, toys, furniture, electrical machinery, and textiles. This is to gauge if “non-essential” purchases of some of these products from overseas can be trimmed by making the license requirement mandatory.
Other segments that have also come under heightened scrutiny are sports goods, CCTVs, steel, aluminum, electric vehicles, auto components, TV set-top boxes, ethanol, and copper. The government is also planning to impose a 20-25% import duty on active pharma ingredients (API) that can be produced locally to cut reliance on China.
The government has already been deliberating on a slew of tariff and non-tariff proposals to control low-grade and “non-essential” imports and promote domestic manufacturing, the share of which in the country’s GDP has remained stagnant at about 15-17% for three decades now.
While the immediate target seems to be imported from China, which has initiated a border clash with India and is the largest source of substandard products. Customs officials have long suspected that China may be diverting its supplies to India via Asian nations, ill-treating rules of origin, to illegally take advantage of duty-free market access under the FTA.
In fact, after Singapore and Hong Kong, Vietnam has emerged as the third Asian trade partner, which counts on huge Chinese investments, to turn its usual trade deficit with India into a decent surplus in just three years. Between FY18 and FY20, India’s trade balance with Vietnam swang from a surplus of $2.8 billion to a deficit of $2.2 billion, according to official data.
In India for certain items, inputs required for manufacture certain products re exempted from import duties. For example, in the case of a television, certain parts like open-cell, chips on films, printed circuit boards assembly are exempted from import duties. This is done to promote local production, under a phased manufacturing program (PMP).
Former vice-chairman of NITI Aayog Arvind Panagariya had mentioned that requiring import license would be a violation of WTO rules and warned against raising import tariffs. However, some analysts say the license requirement is in sync with the WTO framework unless “aggrieved countries” can prove it’s done to restrict trade flow. The government has stepped up discussions with industry to limit substandard and non-essential imports and replace these with domestic production. The government has also decided to review FTAs with trading partners, including Japan and South Korea
