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After gold and LCD TV,govt set to make clothes,laptops more expensive

The Centre is likely to bring in more import curbs in the second half of the year.

Written by Himani Kaushik | Published: September 3, 2013 8:57:41 am

The Centre is likely to bring in more import curbs in the second half of the year for certain non-essential and electronic items,indicating a prolonged battle to stabilise a battered rupee and keep the current account deficit below the targeted $70 billion.

While there have already been measures to curb imports of non-essential items such as gold,platinum and silver,along with duty hikes on LCD TV sets recently,sources said the finance and commerce ministries have held discussions to consider raising duties on more luxury items like imported watches,perfumes,clothing and on imported electronic goods like laptops,refrigerators,music systems.

The recommendations to curb imports of these items were given by a panel headed by joint secretary,budget,Rajat Bhargava. The panel was set up after finance minister P Chidambaram stated in a press conference in July that the government was looking at import compression as a way of containing imports,and hence the CAD.

The panel was in favour of imposing these curbs one after the other.

However,after discussions were held between senior officials in commerce and finance ministeries,it was decided that most of the curbs would be decided upon only after the first half of the financial year.

“We will take stock of the situation in October on where do we stand in terms of trade deficit,CAD and the currency. If need be,only then we will take a decision on raising duties on those items,” a senior finance ministry official told FE.

“There are many things to be considered here. We can’t just increase duties as a lot of these items are bound by trade agreements with different countries. If we curb imports,chances are the country may also curb what we export to them. So we need to talk to our trade partners,” the official added.

Another official said that the government wanted to roll out these curbs in a calibrated manner as such measures,if taken in one go,could be seen as too desperate and harsh in public and investors perception.

The official said luxury items constitute 3-4% of the total import basket. Meanwhile,electronic item imports in FY2013 were $4.9 billion,more than 6% of the total import Bill.

Since the announcement by the US Federal Reserve that its quantitative easing programme will be tapered off and eventually stopped,currencies of all emerging markets have depreciated heavily. India’s situation has been compounded by its bloated CAD,which Chidambaram has promised to contain at $70 billion.

To achieve that target,policymakers expect gold imports are to be contained at around $38 billion in FY14,sharply down from $53.8 billion in FY13.

This would allow overall imports to be roughly $6 billion less than last year’s at $496 billion,even as the oil import bill could be around $170 billion,the same level as last year. The government also expects a positive upside on the exports front.

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