The budget decision of customs duty hike boost domestic market?
In his speech on the 2018 budget of February 1, Finance Minister Arun Jaitley announced an increase in the customs tariff on 40 categories of goods in the range of 33-100 percent. It was said that the increase in customs duties could achieve the objectives of promoting national value added through the promotion of “Make in India” and the creation of more jobs in the country.
Will the movement achieve these goals?
How will the general collection of the central government’s customs duties impact?
How big is the coverage of the decision of the budget of Finance Minister Arun Jaitley to increase the customs tariff on the import of a variety of items? And what will be the impact of the decision on the collection of government customs duties during 2018-1919?
A quick analysis of government data shows that the coverage of customs duties is relatively large, but the figures for collecting customs duties in the budget may be an underestimate.
Until February 40, 2018, basic customs duties were collected for up to 40 product categories. According to the speech on the February 1 budget, these changes of obligations were made to provide adequate protection to the national industry, encourage national added value by promoting ‘Make in India‘ and help create more jobs in the country.
Almost a quarter of India’s total imports could be affected
In addition, almost a quarter of India’s total imports could be affected by the higher customs duty imposed by Jaitley on these imports. The value of imported items whose basic customs duty has increased was estimated at $ 75 billion in the period from April to November 2017-18.
This represented approximately 25 percent of total imports of $ 297 billion during the first eight months of 2017-18, for which we have the latest foreign trade data based on basic products.
In 2016-17, these 40 product categories saw imports of $ 85 billion, which was 22 percent of total imports of $ 384 billion that year. One year before that, imports of the same items were valued at $ 88 billion, which represents a 23 percent share of total imports of $ 381 billion during 2015-16.
At the aggregate level, there was a notable increase in imports of these 40 product categories in the period from April to November 2017-18. If imports in the current year were carried out at the same rate as observed in 2016-17, the value of imports of these 40 items should have reached a level of only $ 56 billion in the first eight months of the year. fiscal in progress.
However, as the data show, these imports in the same period have already reached $ 75 billion, indicating an increase of 34 percent.
Imports of diamonds and precious stones
Diamonds and precious stones (excluding rough diamonds) accounted for most of the imports that were affected by the increase in customs duty announced in the budget.
Imports of diamonds and precious stones in April and November 2017 were estimated at $ 50 billion (almost 17 percent of total imports), compared to imports of $ 54 billion in all of 2016-17 and $ 56 one billion in 2015-16.
The basic tariff on these items has doubled from 2.5 percent to 5 percent.
Experts point out that imports of diamonds and precious stones are linked to exports since a large part of those imports are used for exports after the addition of value. But that link has been negatively affected in recent years. Exports of diamonds and precious stones were valued at only $ 28 billion in the period from April to November 2017-18, $ 44 billion in 2016-17 and $ 39 billion in 2015-16.
Imports increased much faster than exports in 2017-18 than in the two previous years.
Cellular mobile phones and their specified parts and accessories have seen their customs duties rise from 15 to 20 percent, and from 7.5 to 15 percent, respectively.
The combined value of their imports has also seen an increase of $ 12 billion in April-November 2017. Compare this with imports of around $ 16 billion each in 2015-16 and 2016-17; an increase of 12 percent in its imports in the current financial year is remarkable, which could well have led to the Budget action to increase the customs tariff.
Smart watches and portable devices
Smart watches and portable devices (including perhaps the hugely popular smartwatches produced by Apple) have seen their customs duties rise from 10 percent to 20 percent. Its imports in 2015-16, estimated at $ 2.3 billion, rose marginally to $ 2.38 billion in 2016-17.
But in the first eight months of the current fiscal year, they were estimated at $ 2.44 billion, registering an intelligent increase.
The accessories of automotive vehicles, automobiles, and motorcycles have also seen that the customs tariff on them increases from 7.5-10 percent to 15 percent. Its imports in 2016-17 decreased to $ 6 billion from $ 6.49 billion in 2015-16. But the pace rose somewhat in the period from April to November 2017-18 when its imports were estimated at $ 4.95 billion.
Edible oils of vegetable origin are the other category of products with significant imports that have increased the customs tariff in the budget from 12.5-20 percent to 30-35 percent. Its imports have steadily increased from $ 1.5 billion in 2015-16 to $ 1.6 billion in 2016-17. Maintaining this rate of increase, its imports in the first eight months of 2017-18 were estimated at $ 1.3 billion.
With the exception of diamonds and precious stones, almost all other items on the list of the 40 selected for a higher basic customs tariff are used to a large extent for domestic sales and consumption. Diamonds and precious stones contribute significantly to exports.