India is hiking import duties on an additional 15 items to keep its current account deficit in check

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  • On 11 October, the Central Board of Excise and Customs (CBIC), said it was hiking tariffs on a host of items such as telecom and communication equipment upto as much as 20%
  • The move comes just a fortnight after the government raised duties on 19 “non-essential” items such as large household appliances, furniture, jewelry and footwear.
  • The measures are part of a larger plan to keep India’s current account deficit, which occurs when imports exceed exports, in check and prevent further damage to the rupee.

On 11 October, the Indian government, acting through the Central Board of Excise and Customs (CBIC), said it was hiking tariffs on around 15 products upto as much as 20% - its sixth such move in the year so far.

The latest duty hikes were levied on telecom equipment, especially imported components for mobile devices, as well as inputs used for communication equipment like base stations, printed circuit boards and loop carrier systems. The products accounted for $5 billion worth in the previous financial year, according to reports. The hike will likely encourage telecom companies to prioritise the domestic sourcing of equipment.

The move comes just a fortnight after the government raised duties on 19 “non-essential” items. These included large household appliances, furniture, jewelry and aviation turbine fuel. To complement the duty hikes, the government is also planning to boost exports by increasing the flow of credit to exporters and promoting the agriculture, pharmaceuticals and textiles sectors.

The measures are part of a larger plan to keep India’s current account deficit, which occurs when imports exceed exports, in check and prevent further damage to the rupee. India’s current account deficit is expected to increase to 2.8% of GDP by the end of this year from 1.9% at the end of March 2018.

When imports decline relative to exports, it helps prop up a nation’s currency as it buys lesser foreign currencies than before. On 11 October, the rupee closed at a record low of 74.13 to the dollar, capping a 14% depreciation in the year to date.

Earlier this week, the government was also said to be mulling a plan to secure the help of Non-Resident Indians (NRIs) in keeping the rupee afloat. In the past, India has tapped its sizeable contingent of diaspora with special bond issues and dollar deposit programmes.

For example, in 2013, as the rupee plummeted towards the 70 mark, the Reserve Bank of India (RBI) implemented a scheme to attract deposits from NRIs in foreign currencies, eventually swapping them for rupees. This increased the amount of overseas funds entering India, thereby stabilising the rupee.
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