Budget 2020: Brace up for import duty hike as govt roots for 'Make in India'

Govt target is to bring down import of lesser-priced products from China

INDIA-TRADE The Federation of Indian Export Organisations (FIEO) has called for an export development fund to support small exporters, with a corpus of 0.5 per cent of the country's exports

With reviving the Indian economy being the primary concern, boosting local manufacturing by adding export duties on many finished goods is likely to be a continuing focal point in the upcoming Union budget. Additionally, certain raw materials may receive relief from import duties to further boost 'Make in India'.

Reports suggest the government will look at increasing import duties on a host of materials, especially across electronics, chemicals and even handicrafts. RCEP or not, the target is clear—slow down the deluge of lesser-priced products from China.

One of the primary targets would be mobile phones, with the government hoping this will make the many global phone makers who now manufacture in China to follow Apple's example and set up handset manufacturing plants in India. Apple had announced last year that it will invest up to $1 billion through its vendors in India. The flood of feature-rich, lesser-priced 'Made in China' mobile brands had virtually killed off the local mobile makers. 

While the government has an in-principle theory of increasing duties on finished products and decrease them on raw materials, it is not clear whether this will pan out to cover raw materials like chargers, vibrator motors and ringers as well as rare metals that are used in smartphone hardware. Domestic manufacturing as well as the all-important revival of consumption could take a hit if not.

With MSMEs forming a primary chunk of exporters, the Federation of Indian Export Organisations (FIEO) has called for an export development fund to support small exporters, with a corpus of 0.5 per cent of the country's exports. FIEO has also called for a double tax-deduction scheme for overseas activities of MSMEs. Meanwhile, the Federation of Indian Micro, Small and Medium Enterprises (FISME) has called for a thorough review of export-oriented public institutions like the Exim Bank as well as the many export promotion councils so that they may better help exporters deal with challenges like non-tariff barriers.

Another interesting proposal from FIEO is for the government to include a provision for providing inland freight subsidy to exporters based in land-locked states to make them more competitive. FIEO suggests the cost of subsidy be shared equally between the Centre and the state.

Commerce ministry has reportedly requested reducing the import duty on gold. The present high tariff of 12.5 per cent, coupled with increasing global prices of the precious metal had meant import costs had gone up drastically in the last few months. This, the ministry says, has deeply affected the forex-earning gem and jewellery sector.

Industry body ASSOCHAM, meanwhile, has requested something simple enough—do not change policies and regulations frequently. “To improve export competitiveness, there is greater requirement of stability in policy for at least 3-5 years,” a release by president Niranjan Hiranandani says. But not before the Rebate of State & Central Taxes and Levies Scheme (RoSCTL) is implemented, along with competitive interest rates for exporters via government intervention.