November 21, 2024

Tariff Barriers: Return To Protectionism?

By Sunil Garodia
First publised on 2022-12-21 10:50:47

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Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

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The Centre has proposed to raise import duties on non-essential items. There can be no argument over this. If Indians can live without some non-essential, luxury items but are yet willing to import them they should be ready to pay a higher price for them. But the dispute is over the definition of non-essential. In the latest proposal, non-essential items have been sought to be defined as items for which "adequate domestic manufacturing capacity" exists. In other words, if an item is being produced in India and if it is being produced in quantities sufficient enough to address the demand for that item, than for the purpose of the latest proposal that item will be considered non-essential and imports of such items will carry a higher import duty.

The government proposes to identify such 'non-essential' items through a 'granular' assessment by individual ministries who will then make a list of items that are being manufactured in the country but are still being imported. It will not be assessed whether these items manufactured in India are of the same quality or value. Just the fact that they are being produced in India and still being imported will be enough for the imported items to carry higher duty.

If the idea is to protect domestic industry by higher import tariffs then this move is not good. There are two parallel ideas being promoted by the government. The first is Make in India and the second is Atmanirbhar Bharat. Both have noble intent. But if tariff barriers are erected, it will work to our disadvantage. The country should only produce items which it can do best and at the optimum cost. It will then be competitive and will be able to export those items. Items which it cannot produce well (in terms of quality and pricing) should be allowed to be imported.  Make in India will only succeed when we work on our strengths and true atmanirbhata is not in being self-reliant in all things but in things which we can produce well and export to the world. The rest we can import at lower costs. We can then divert the capital and infrastructure used for making these 'non-essential' items to more productive uses. That would work to the best of our advantage. It has to be admitted that no country in the world will ever be able to produce all it needs locally. That is why import barriers, except in cases of obvious dumping by other countries, are disadvantageous for global trade.