InvestorQ : What are the specific items on which the Budget has raised the customs duties on imports?
diksha shah made post

What are the specific items on which the Budget has raised the customs duties on imports?

Archita Jajjoo answered.
2 years ago

The Budget announced on 01-Feb has hiked customs duty on over 20 items ranging from cotton and raw silk to specific categories of plastics, leather, auto parts and even screws and nuts. The idea of these tariff hikes is not only to provide a level playing field domestic product manufacturers facing dumping, but also to the farmers. It is about local potential.

For example, government sees potential in domestic manufacture of capital equipment. As a result, the budget has proposed to withdraw exemptions on tunnel boring machine, which will now attract import duty of 7.5% while its parts will attract duty of 2.5%. Similarly, duties have been tweaked to encourage domestic manufacture of electronics, mobile phones, chips etc. Some mobile components moved from zero duty to 2.5% duty.

Another such area is encouraging local manufacture of auto components, which is still China-centric. Since, India has competitive auto parts manufacture skills, the only challenge is to give them a larger local market to gain economies of scale. That is the reason stocks like Dixon have attracted so much of interest in the last few months in the stock market.

This is in a way, a kind of continuation of the import substitution policy that was first announced by the Modi Government in the Feb-2015 budget. Since 2018, Indian government has been clear that comparisons should only be made based on per capita income and in the case of India tariff hikes should be legitimate in domestic economic interests.

Apart from revenues, the import duties will also play the role of creating more jobs in the manufacturing sector and gradually ease the migration of people from farm to non-farm jobs. Also, the de-risking of China supply chain is not just an Indian concern but a global concern. As the opportunity opens up to Indian manufacturers to replicate China, import policy should be aligned with this goal.