Merely tinkering with import duties will not help in narrowing the current account deficit (CAD), but some more measures will. Analyse the statement in the light of the recent decision by the government to increase customs duty on imports of some items. (200 words)
Refer – The Hindu
Enrich the answer from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
· Recently, the government raised import duties on 19 non-essential items.
· It is aimed at narrowing the current account deficit (CAD) in order to save Indian rupee from the incessant fall it has seen in the recent past.
Effectiveness of such move
· Using tariffs to curb imports of these items will not have a significant impact on narrowing the current account deficit (CAD).
· For instance, the total value of imports of those 19 non-essential items in the year 2017-18 was just Rs 86,000 crore.
· These imports constituted a little less than 3% of the country’s merchandise import bill in 2017-18.
· The first six months of the current fiscal have already been elapsed.
· Thus containing the CAD through this tariff increase is going to be short-term and marginal.
Measures to narrow CAD
· Exports – A more robust approach would be to institute measures to boost exports and simultaneously reduce the import-intensity of the economy.
· Domestic supply chain – Delay in getting GST refunds affects smaller exporters, where they have been badly hit by working capital shortfalls.
· Expediting the refunds on GST to them could help in the establishment of domestic labour-intensive supply chains in India.
· Imports – Despite the abundance of coal reserves, thermal coal is one of India’s fastest-growing imports.
· This is a consequence of under-investment in modernising the entire coal production and utilisation chain and must be addressed expeditiously.
Vignesh 6 years
Kindly review...
IAS Parliament 6 years
Tapasvi 6 years
Kindly review
IAS Parliament 6 years
Nandadeep 6 years
Please review.Thanks
IAS Parliament 6 years
