Budget FY21: Govt likely to impose tariff and non-tariff import barriers

Sandeep Singh, Sunny Verma
Budget FY21: Govt likely to impose tariff and non-tariff import barriers

On February 1, Finance Minister Nirmala Sitharaman will present Union Budget 2020. (File)

In a move that may help the government achieve twin objectives of reducing outflow of funds on account of imports and help domestic manufacturing and job creation, the government is likely to impose tariff and non-tariff barriers on various import items in the forthcoming Budget, set to be presented by the Finance Minister on February 1.

The list of items that may see imposition of non-tariff barriers may include silk and garments, mobile charger, printer, electronic broadcasting equipment, toys, electrical lights, handicrafts, vegetables & fruit and copper alloys.

A source close to the development told The Indian Express that with growing concerns over increasing trade deficit with certain countries and rising outflow of funds on account of imports, the government is deliberating on a proposal to impose non-tariff barriers to address these concerns. He said it will help domestic manufacturing.

Non-tariff measures are policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both, while tariff measures raise duties to make them uncompetitive.

Sources said the government is likely to impose higher customer duties — raising them by up to 10 per cent — on many of the identified items and in some case it would be accompanied by non-tariff measures.

Even as the government has opened up a number of sectors for higher foreign investment, in the last couple of years, it has hiked duties on a series of items to protect and promote the domestic industry.

In the Budget announced last July, the government raised the customs duty on gold and precious metals from 10 per cent to 12.5 per cent. Apart from gold, duties on many other items — luxury cars, cashew kernels, several electronics and associated products such as CCTV cameras and IP cameras, split AC, imported books and newsprint — were also raised. Further, customs duties on items such as windscreen wipers, sealed beam lamp units, intake air filters, oil or petrol filters, vehicle locks and glass mirrors were among the other items on which duties were raised.

The Union Budget of 2018-19 too had increased customs duties on 46 items, while marking a calibrated departure from the underlying policy of reducing import duty over the last two decades. The hike in customs duty on these 46 items was mainly across two broad categories of goods — imported branded goods and those involving technological value-addition — where duties were mostly raised from the 10 per cent bracket to 15 per cent and 20 per cent, with one segment seeing a five-fold increase in duty to 50 per cent.

Since early 2016, when attempts to get the domestic industry to rekindle the investment cycle failed, the government has increasingly resorted to tariff hikes to signal an incentive for domestic investors.