Higher import duty on a new list of items under consideration; govt also mulling quantitative restrictions on certain imported goods
The government may announce a fresh set of measures that could include higher customs duties and import restrictions on a certain non-essential items as part of a broader plan to contain a widening current account deficit (CAD) and arrest the rupee’s slide.
It is learnt that there could be a new list of items that would attract higher import duty. In addition, sources said that the government is also mulling quantitative restrictions on inward shipments.
The Prime Minister’s Office (PMO) will also take stock of the situation on Friday (October 12), particularly with the situation pertaining to CAD and depreciating rupee, sources told Moneycontrol.
India’s CAD widened to 2.4 percent of GDP in April-June and the rupee is hovering at above 74 to a dollar.
The finance ministry had last month hiked import duty on high-end consumer items including washing machines, air conditioner, footwear, diamonds, jet fuel as a part of its plan to get foreign funds flowing back to India and to reduce CAD and stabilise the domestic currency.
“The list will mainly include items for final consumption. There will be no import curbs on intermediate goods as these items used in production process and a higher tariff will affect the domestic industry,” a source in know of the matter said.
Restricting imports is a part of the government’s earlier announced five-point strategy to arrest the rupee’s slide. Prime Minister Narendra Modi met Finance Minister Arun Jaitley and officials Reserve Bank of India (RBI) among others, last month to review the current economic scenario to work out a strategy to bolster the market’s confidence and improve the macroeconomic scenario.
The measures included removal of withholding tax on masala bonds, relaxation for foreign portfolio investors, and curbs on non-essential imports, to contain the widening CAD, which has widened to 2.4 percent of the GDP in April-June and check the rupee’s fall.The domestic currency has been falling continually over the last two months on the back of rising global oil prices, and concerns over current account deficit and capital outflows. On October 11, rupee closed at Rs 74.12 per dollar.