Is the government using the inflation scare as a cover to cut import duties? India continues to be one of the most highly protected economies in the Asian region, despite statements by successive finance ministers that import duties should drop to East Asian levels.
The problem is that any move to reduce protection always leads to howls of protest from powerful business lobbies. This has happened right since 1992, when the first deep cuts in import duties were announced. The current economic boom is likely to leave the government with a far lower fiscal deficit than it originally budgeted for. That’s the perfect setting for tax cuts, especially in import tariffs.
The fact that inflation is now well above official targets means that there can be little protest when duties are cut to ease the pressure on consumers. The curious thing is that the same argument can be used to cut tariffs in non-inflationary times as well. Why the subterfuge?