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India: Lowering import duties will help the economy

Finance Minister in India Arun Jaitley, speaking at an official event on December 4, made a strong case for lowering of import duties. Higher the tariff, bigger the evasion across sectors, he said. This is most welcome. Lower import duties will for sure create conditions for high growth in trade and investment and help the economy in at least four ways.

One, increase India’s export. Lower duties will remove a big structural weakness of India’s exports by enabling participation in the global value chains (GVCs). Products manufactured in GVCs account for two-thirds of world trade, but India’s share is meagre.

Consider India’s share in few products manufactured in GVCs: Mobile phones (0.19 per cent), integrated circuits (0.01 per cent), computers (0.04 per cent), solar-powered diodes, transistors (0.14 per cent), LCDs (0.04 per cent). India’s overall share in world goods trade is 1.7 per cent.

What’s the reason for a low share in GVCs? Mainly, import duties and time taken at the port/Customs. Since the complex production process requires goods to cross borders several times at different stages, any duty charged has a cascading and accumulative effect on trade. A reduction in import duty and quick clearances at the port/Customs will improve the situation and help Indian exports.

Read more on The Hindu BusinessLine.


Source: The Hindu BusinessLine

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