The government of India has identified hundreds of products, including electronics, toys, blankets and several daily-use items for possible “import substitution” by discouraging their shipments into the country. While the commerce department, which is spearheading the move, has prepared a detailed list of products and a final decision will be taken only after consultation with other government agencies. The strategy to check imports could be multi-fold, including an increase in import duty to prod global players to set up shop in India and provide protection to domestic industry that may be currently manufacturing it. Besides, a list of products are also being discussed for possible safeguard action by the Directorate General of Trade Remedies, including products such as iron and steel among 100-150 items that are under scrutiny.
While the commerce department has been seeking standards for a host of items to check imports from China, its suggestions have found few takers even within the government with some of the ministers themselves opposing it. Import substitution has been a key theme of commerce and industry minister Piyush Goyal ever since he moved into Udyog Bhawan in June. He along with some of his colleagues in the government such as MSME minister Nitin Gadkari sees it as part of the ‘Make in India’ strategy, which will also help exports in the long run. India has a poor export performance to show during the last five years, although the government has blamed global demand for it.
Critics are, however, arguing that the entire plan, where repeated rounds of discussions have also taken place, could come a cropper if the government goes ahead with the signing of the Regional Comprehensive Economic Partnership (RCEP), the proposed free trade agreement between the ASEAN countries, China, Japan, South Korea, Australia and New Zealand as India will allow duty free import of 80-90% goods at low or zero duty.
At the same time, a knee jerk response by raising import duty or other restrictions on products is also fraught with other risks. For instance, the department is now realising that it may have erred in putting curbs on agarbatti and related product imports as it may be detrimental to the interests of domestic players. Similarly, higher import duties on some of the electronic products have resulted in discouraging imports from several countries but higher shipments from Vietnam, which is part of Asean and has a free trade agreement with India.
