Will Budget decision of customs duty hike boost domestic market? Unlikely!
In his Budget 2018 speech on February 1, Finance Minister Arun Jaitley announced an increase in customs duty on 40 categories of goods in the range of 33-100 per cent. The increased customs duties, it was said, would be able to achieve the goals of encouraging domestic value addition by promoting ‘Make in India’ and helping creation of more jobs in the country. Will the move achieve these targets? And how will it impact the central government's overall customs duty collections? A K Bhattacharya explains in this BS Special piece: How large is the coverage of Finance Minister Arun Jaitley’s Budget decision to raise customs duty on the import of a variety of items? And what will be the decision’s impact on the government’s customs duty collection during 2018-19?
A quick analysis of government data shows that the coverage of the customs duty changes is relatively large, but the customs duty collection figures in the Budget may be an underestimation. As many as 40 categories of products saw their basic customs duty being raised with effect from February 2, 2018. According to the Budget speech of February 1, these duty changes were made to provide adequate protection to domestic industry, encourage domestic value addition by promoting ‘Make in India’ and help create more jobs in the country. The increase in the duty incidence ranged between 33 per cent and 100 per cent for most of the items (see chart 1). What’s more, almost a fourth of India’s total imports could be impacted by the higher customs duty levied by Jaitley on these imports. The value of imported items whose basic customs duty has increased was estimated at $75 billion in the April-November period of 2017-18. This was about 25 per cent of total imports of $297 billion during the first eight months of 2017-18 for which the latest commodity-wise foreign trade data are available. In 2016-17, these 40 categories of goods saw imports of $85 billion, which was 22 per cent of the total imports of $384 billion that year. A year prior to that, imports of the same items were valued at $88 billion, accounting for a share of 23 per cent of the total imports of $381 billion during 2015-16.
ARTICLE SOURCE- BUSINESS STANDARD.