Budget Encourages Make in India, Attempts To Tackle Trade Deficit With China

Is the 2018-19 Union Budget a narrative that supports ‘Make in India’ to the core? And is the Narendra Modi government tackling the huge trade deficit with China through strategic hike in customs duties? Yes, if one goes by the memorandum explaining the provisions of the Finance Bill, 2018.

This also means some of the imported products you buy will be dearer. There are measures that will help farmers and processing of agricultural produce like fruits and vegetables. Nothing illustrates this better than the import duty on fruit and vegetable juices being increased to 50 per cent from 30 per cent. Import of fruit and vegetable juices may not bring in much revenue, though, since a major part of the demand is met from domestic produce.

The government has fixed the import duty on crude edible oil at 30 per cent and on refined edible oil at 35 per cent. While the duty on crude edible oil remains at 30 per cent as fixed by the government on 18 November, the levy on refined cooking oil is down by five percentage points. The government had raised the duty after prices of groundnut crashed in Gujarat and other parts of the country.

Solvent extractors or oilseed crushers have been demanding a higher import duty to discourage imports. A bulk of Indian vegetable oil imports are in the form of palm oil and its products, mainly from Malaysia and Indonesia. India imported over 15 million tonnes of edible oil, spending precious foreign exchange of over Rs 75,000 crore during November 2016-October 2017. Nearly 70 per cent cent edible oil needs are imported.

Duty of imported cosmetic and beauty-make up products has been doubled to 20 per cent, while a long pending demand of the tyre sector has been met with the duty being raised to 15 per cent from 10 per cent. Levy on imported motor parts and accessories has been raised to 15 per cent. The jewellery sector gets some relief with duty on imitations being hiked to 15 per cent. Duty on silk fabrics has also been targeted with the levy rising to 20 per cent from 10 per cent. All these are aimed at encouraging production at home.

Duty on imported mobile phones, its batteries, spare parts will all now be higher at 15 per cent. But will this duty hike be enough to stop the Chinese juggernaut? Electronics, toys, mobile phones, their accessories, lamps, wrist watches, video games, fishing rods, candles, kites and sunglasses from China are being lapped up by Indian consumers in a big way. A 5 per cent duty has been slapped on preform of silica used for optic fibres. The duty hike in these products ranging from five percentage points to 15 percentage points, hopefully, will narrow the trade deficits.

The Budget proposes to abolish education cess of 3 per cent aggregate duties and instead replace it with social welfare cess of 10 per cent aggregate of all customs duties. A similar duty of three per cent has been imposed on gold, petrol and high-speed diesel.

On petroleum products, the government has decided to replace the Rs 6 per litre infrastructure cess with Rs 8 per litre road and infrastructure cess. However, additional customs duty on these products have been cut by Rs 2 a litre. These amendments should, basically, not help consumers, who had been expecting some relief in the wake of galloping fuel prices.