Centre May Announce Import Curbs by Increasing Customs Duty

To ease the pressure on rupee and keep the widening Current Account Deficit (CAD) on check, the Centre may announce import curbs by increasing customs duty on several 'non-essential items' as soon as this week.

Imported consumer durable items like high-end mobile phones, refrigerators, luxury cars, furniture and dry fruits as the government will soon increase customs duty.

To ease the pressure on rupee and keep the widening Current Account Deficit (CAD) on check, the Centre may announce import curbs by increasing customs duty on several ‘non-essential items’ as soon as this week.


A top source in ministry of finance said the first wave of import curbs will include items like luxury cars, high end mobiles, steel, aluminum, electronic items and furniture.

Other items added to the list are dry fruits and imported fruits like almonds, and alcoholic beverages. However, the government might spare gold which faces a basic customs duty of 10% ahead of the festive season, which sees a huge gold import every year.

A committee headed by Cabinet Secretary PK Sinha is identifying the list of these non-essential items.

The panel is making sector-wise details of items, which can be termed “low need-high foreign exchange outgo”.

Experts suggest gold may be spared due to the reason that the upcoming festival season is a high consumption period, and any curb may lead to greater smuggling of the yellow metal.

The imports of electronic items, including mobile phones, colour TVs, digital cameras, digital processing units, etc, have increased by 16.2 per cent in FY19. Increasing customs duty on these items means they could be more expensive.

In addition to that, the government could also increase the deadline to impose higher customs duty on 29 US products.

The government had announced to impose higher tariffs on 29 US products from August 4 till September 18 after the US imposed heavy duty on steel and aluminum from India.

However, considering the current economic scenario, the Centre may push the deadline further.

The decision to ring fence the rupee through some domestic measures was taken at a review meeting chaired by the Prime Minister on Friday.

A senior ministry official said the curbs may applicable by this week or the end of the month. The exact quantum of the benefits of such curbs is being calculated.

The Centre’s latest move could act as a balancing act to help CAD and the falling rupee. The finance ministry is said to be also exploring the option of imposing “safeguard duty”, which in simple terms is a levy to shield domestic industry from aggressive imports from countries like China.

A source said the curbs on items like steel are not likely to impact the supply as the domestic industry has the capability to avert any imbalance.

At present, India’s import basket has three categories: overall, non-oil and non-oil-non-gold. The biggest drain is on oil and gold, which top the list of imported goods.

While India’s total imports moved up from 185 billion dollars in 2017 to 216 billion dollars in 2018, oil was the biggest contributor as it moved from $38 billion to $58 billion.

Gold moved down from $15.3 billion to $15 billion due to the curbs and checks by the Centre. Though the exports picked from $117 billion from $135 billion, the trade deficit shot up from $67 billion in 2017 to $81 billion in 2018.

In this calendar year alone, the rupee has fallen over 12 per cent, creating a serious threat in the form of widening CAD.

The deficit during the first three months (April-June) of the current fiscal touched 2.4 per cent. Sources say it may shoot up to 3 per cent this fiscal.

The Centre estimates say the overall CAD for the entire fiscal could be 2.5per cent, which is way above the 1.9 per cent recorded last fiscal.

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