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the government is planning to regulate imports of “non-essential items” through hikes in import duties because a slowdown in exports is being seen as a cause of concern in the context of a widening trade deficit.
Import duty
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About
- Several ministries are in the process of shortlisting the commodities for duty hikes.
- The list will reportedly be restricted to only the commodities that have “enough manufacturing capacity” in the country.
- The government is also looking for ways to separate commodities that come under the same Harmonized System of Nomenclature (HSN) code for imposing duties.
- An HSN code subsumes a broad sweep of items. All the items under one HSN code are, however, taxed at the same rate.
- But under the current deliberations, the Centre is likely to impose duty only on a few items under a code and not all.
- An HSN code subsumes a broad sweep of items. All the items under one HSN code are, however, taxed at the same rate.
Harmonized System of Nomenclature (HSN) code
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Earlier Instances
- The last set of duty hikes across a range of product categories happened in Budget 2022-23.
- Most of the products were being imported from China, either as complete units or as knocked-down units to be assembled in factories in India.
Objectives
- Over the last five years, import duty hikes have been made on several occasions such as on almonds, apples, and others.
- Mobile phone parts and solar panels have seen the most regular hikes, in large part to protect and promote the domestic industry.
Future Prospects
- To reduce the trade deficit, the government’s policy options are to push exports or disincentivise imports.
- But a poor outlook on global growth means India’s exports will suffer just like most other countries.
- The other way is to hike duties on imports, particularly those that are not critical and are produced in India.
- This will keep the deficit down.
Source:IE
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