Import curbs on items targeting China may shield FTA partners

India is working to ensure that the next round of import tariff hikes targeting China includes items that are covered under free trade agreements with other trade partners, in order to insulate them, and for which domestic capacities and alternatives exist to avoid shortages.

"The Commerce and Industry Ministry has received inputs from various industry bodies and council's proposing items where import duties can be increased. The suggestions are being vettted for their appropriateness and a final list is being drafted," an official told BusinessLine.

The Centre is trying to come up with tariff and non-tariff measures on goods mostly imported from China in order to bridge its high bilateral trade deficit with the country valued at $48.66 billion in 2019-20. India also wants to punish its neighbour for inciting violence at the India-China border in the Galwan valley and is taking steps to bring down its economic engagement with its neighbour.

Suggestions have been given by industry bodies such as CII, FICCI, Assocham, various export councils and those representing the small industry on imports which could be contained. “All sectors view the matter from their own perspective, so the government has ended up with numerous suggestions which have to be weighed,” the official said.

‘Focus on final products’

The Commerce Ministry is now trying to identify items where an increase in duties will not hurt the domestic industry. “To ensure that an increase in import duties for a particular item doesn’t hurt the economy, it is important to have enough domestic capacities for its production, or alternatives to those items should exist in the local market,” the official said.

Another important factor that the government is taking into consideration while short-listing is the effect of the proposed duty hikes on countries other than China. “Officials are looking at items that are protected from tariff increases under the free trade agreements India has signed with its various trade partners such as Japan, South Korea, Singapore and ASEAN. If tariffs are raised on such items, imports from these countries won’t be affected,” the official said.

Some items, including consumer goods, that are being considered for the next round of tariff and non-tariff barriers include chemicals, telecom equipment, leather goods, steel items, gems and jewellery, furniture, hardware and textiles.

“Many suggestions have come from the industry proposing that the tariff increase should be on final products and not intermediaries that could hurt the user industry,” the official said.

The Finance Ministry had raised import duties on 111 products in the Union Budget announced earlier this year, out of a list of 300 items prepared by the Commerce Ministry.