Why the proposal to raise import duties on non-essential items must be abandoned

Source: The post is based on the article “Why the proposal to raise import duties on non-essential items must be abandoned” published in The Indian Express on 21^st December 2022.

Syllabus: GS 3 – Indian Economy

Relevance: higher import duty and problems associated with it

News: The government is planning to raise import duties on all non-essential items. The recent trend also shows that there has been an increase in the import duties which is not good for the nation.

What has been the recent trends on the import duty?

India’s customs duty on non-agricultural products had come down from 150 per cent to 10 per cent between 1991-92 and 2007-08.

However, this trend has been reversed and the country’s average applied import tariff which stood at 13.5 per cent in 2014 rose to 18.3 per cent in 2021.

The last 4-5 years have also seen an seen an increase in the import duty in a range of products such as solar modules and cells, mobile phone parts, etc.

Further, the government is again planning to increase the import duty which is not good.

Why is the recent plan to increase import duty on non-essential items is not a good idea?

The government is trying to increase duty on those products which are fully grown in the market such as Giorgio Armani perfumes, Johnnie Walker single malts, etc. The decision shows the protectionist nature of the government.

It also takes India back in the pre reform era and Nehruvian era where import duties were imposed to protect the domestic industries. However, things have changed now.

The problem with this is that it favours one industry over the other and what may be output for one is input for another. Thus, it affects the overall growth of the nations.

Further, the focus of the businesses also shifts to those products that are giving higher returns and has a greater market. Thus, impacting a balanced growth and the consumers and user industries being the losers.

What is the way ahead?

India is heading towards Atmanirbhar Bharat. It means India should produce not just for itself but also for the world and earn foreign exchange to be able to import things it cannot produce competitively.

Therefore, atmanirbharta should never act as a door for protectionism and government should rethink its plan on raising import duty.