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Finished jewellery may attract higher import duty.
A fresh round of duty increases on precious metals and stones may also be in the offing, a Commerce Department official told Business Line .
The move is aimed at helping the Finance Ministry identify non-essential goods that have room for increased duties. This is part of efforts to reduce the current account deficit , which had touched 4.9 per cent of the GDP in fiscal 2013 , and to strengthen the rupee, currently hovering around 64 to a dollar.
The current account deficit, which is the excess of import of goods, services and transfers over exports of the same, is directly impacted by the trade deficit, which occurs when imports exceed exports.
“Local jewellery manufacturers have been complaining that retailers have started placing orders for finished jewellery directly with overseas companies, as it has become cheaper to import these. Their business has taken a hit because of this,” the official said.
More sectors
The Government had last month raised import duty on gold, silver and platinum (the third time this year) to 10 per cent to check imports and rein in the widening current account deficit. The import duty on finished jewellery, at 11.5 per cent, is now on par with the duty on gold (after its value addition).
While the increase had helped lower gold import to $650 million in August , compared with $2.2 billion in July, the Commerce Department is of the view that there is room for more.
“For suggesting increase in import duties, we are basically looking at sectors where exports are higher that $500 million . There is still scope to increase duties on precious metals, stones and jewellery sectors,” the official said. The increase in import duties on select non-essential goods will take place one sector at a time, the official added.
India’s trade deficit, which had crossed $20 billion in May, pulled back to $10.9 billion in August, thanks to exports clocking double-digit growth and declining imports.
The Government, however, cannot be complacent, as rising oil prices could put a strain on the trade deficit and the current account deficit in the coming months.
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