Imports of finished electronics, certain textiles, automobiles and high-end consumer products like watches could be the set of items that could feel the heat from the government’s idea to curb non-essential imports and push exports in a bid to reduce the current account deficit and support the rupee.
While gold figures in the list of top most imports, economists are uncertain of it being included as historical experience shows smuggled gold entering the country whenever it is subject to restrictions.
“Restricting imports will achieve short term gains, if any, while there will be revenue loss on account of customs duty foregone, apart from creating distortion in the market,” said an indirect tax expert. In FY18, India imported $21 billion worth of telcom equipment including mobile phones.
The government has been taking measures to increase domestic manufacture, but in the short term may curb imports to reduce the trade deficit.
India’s gold imports were pegged at $33.7 billion in FY18 and have been one of the main reason for high gap between exports and imports. The government has tried to reduce demand through gold bonds and gold deposit schemes.
Items like high end televisions and cameras may also face the heat. The closest attention is likely to be in items imported from China with which India had a trade deficit of over $63 billion.
Among the food items, India imported $1.4 billon worth cashew nuts in FY18. Crude Oil, precious stones, electronics, heavy machinery, organic chemicals, plastics, animal and vegetable oil, and iron and steel are the country’s topmost import items. The UPA government had imposed curbs on gold imports and raise import duty in 2013 when current account deficit worsened.
Source: Economic Times