Faced with the most consequential Budget since the 2008 global recession, the Indian government is reportedly mulling import duty hikes on over 50 products in a bit to support domestic industry and shore up revenues, Reuters reported government sources as saying.
According to the report, India may hike import duties on over 50 items including smartphones, electrical appliances, furniture and even electric vehicles, in the range of 5-10 per cent. Refrigerators and air conditioners may also attract steeper hikes, the report said. The government is aiming to raise between $2.7-2.8 billion from the moves.
In all these segments, domestic industry has been growing its presence, and the move could be part of the Narendra Modi government’s Atma Nirbhar Bharat Abhiyan mission launched amid the pandemic. India has already enacted negative lists in sectors like defence.
In addition, multiple sectors are also likely to raise prices soon, due to rising input costs due to the pandemic across the board.
The 2020 Budget will be unveiled by Finance Minister Nirmala Sitharaman on February 1. While last year’s Budget itself had come amid steadily declining GDP growth, this year the Budget will take place against the backdrop of a shock contraction triggered by the COVID-19 pandemic and lockdown.
The Indian economy is not recovering as fast as the government claims and the country's economy may contract 25 per cent in the current financial year, noted economist Arun Kumar said on Sunday.
Kumar further said that due to a big decline in the GDP during the current financial year, the budget estimates have gone completely out of gear and, therefore, there is a need to correct the Budget.
The Reserve Bank of India (RBI) has projected the Indian economy to contract 7.5 per cent in the current financial year, while the National Statistical Office (NSO) estimates a contraction of 7.7 per cent.
Also, according to the NSO, the Indian economy contracted by 23.9 per cent during the April-June 2020 quarter and recovered faster than expected in the July-September 2020 quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent.
"We are not going back to the 2019 level of output in 2021. Maybe in 2022, after the vaccination is done, we will recover back to the 2019 level of output in 2022," Kumar said.
He added that the growth rate in the coming years will be good because of low base effect, but the output will be less than 2019.
Asked whether the government should relax the fiscal deficit target in the upcoming Budget, Kumar said, "It has been argued since July that the government should allow the fiscal deficit to rise and spend more and give money to the unorganised sector and in rural areas."
With inputs from PTI
