Imported apples, ACs may cost more

Govt mulls raising duty on non-essential goods with annual import bill exceeding $1 billion

The government is considering raising duties on non-essential items - from apples to air-conditioners - that have an annual import bill of $1 billion each.

The non-essential items under the government's scanner are air-conditioners (window and wall), cameras (television cameras, digital cameras and video camera recorders), unwrought gold and silver, cashew nuts and rough wooden items. Some items, such as fruits & nuts, engineering items and electronic goods, are included under broader categories of import.

The commerce & industry ministry is undertaking an assessment of all such items cautiously to ensure it does not overshoot the level of bound duties India has committed itself to under the World Trade Organization (WTO), a senior official has told Business Standard.

For instance, import duty on apples is already up to 50 per cent but it is 10-12 per cent on air conditioners, 30 per cent on cashew nut and 7.5-12 per cent on cameras.

After completion of the internal assessment process, the government will decide on the items on which import duties could be slightly tweaked to rein in the soaring import bill, which has led to a ballooning trade deficit and current account deficit (CAD).

The government's plan, however, does not impress industry much. "There are not many items in non-essential imports. We have to augment our exports. Managing trade deficit by reducing imports is an obsolete measure," said an industry official, asking not to be named.

Non-essential items are those that are not used in producing other goods. The government had raised duties on some non-essential imported items, such as high-end plasma TV, last month, too.

Finance Minister P Chidambaram had recently said the government would continue to take measures to restrict import of non-essential goods, as CAD had reached a record 4.8 per cent of gross domestic product in 2012-13. For the current financial year, the Centre aims to limit CAD at $70 billion, or 3.7 per cent of GDP. In his address to the Lok Sabha on the state of the Indian economy, the finance minister had said the government was committed to achieving the CAD target.

Trade deficit, which is part of CAD, rose to $190.1 billion in 2012-13, from $183.3 billion the previous year. This was because merchandise imports in the year rose 0.44 per cent to $491.48 billion, from $489.31 billion the previous year; while exports fell 1.76 per cent to $300.05 billion, from $306 billion.

STRAINING AT THE LEASH

• Cutting the flab: Import duty hike likely to be on some more of non-essential items
• Treading with caution: Commerce ministry is carrying out an assessment exercise to ensure it does not overshoot rates bound by WTO
• Getting an axe? Items under scanner are air-conditioners, apples, cashew nuts, cameras, wooden items, unwrought gold and silver