A dose of tariff protection can aid sectors with growth potential: Finance Secretary
A dose of carefully calibrated tariff protection to select domestic industry showing potential for becoming winners may be desirable and will not make the country protectionist, the finance secretary said
NEW DELHI : A dose of carefully calibrated tariff protection to select domestic industry sectors showing potential for becoming winners may be desirable and will not make the country protectionist, finance secretary T. V. Somanathan said at an event on Tuesday evening.
Somanathan’s assertion of India’s free market credentials while explaining the rationale for raising import tariffs comes in the wake of government seeking public comments for reviewing import concessions given to around 100 items for a possible roll back.
Union finance minister Nirmala Sitharaman had in her budget speech this year announced the intention to review more than 400 customs duty exemptions this year and to put a revised customs duty structure in place from October.
“I do not think it is the policy of the government to become protectionist. But if incremental protection from a relatively moderate rate of tariff is necessary in certain sectors of the economy as a transitional measure for an infant industry that must grow up, then perhaps there is a case in some areas," said Somanathan. He was speaking at the ‘India Policy Forum 2021’ event organised by National Council of Applied Economic Research, a think tank.
Somanathan explained that there has not been much benefit from some of India’s free trade pacts. Also, even if free trade may promise economic efficiency in importing certain items from another country, strategic considerations including armed conflicts with certain nations would eclipse such economic efficiency gains. There are instances where economics is overwhelmed by strategic considerations, said Somanathan.
“I am not aware of too many countries which have signed FTAs with countries with whom they have live armed conflicts," the finance secretary said. India had in 2019 opted out of joining the Regional Comprehensive Economic Partnership or RCEP, which includes China and the Association of Southeast Asian Nations (Asean).
Somanathan explained that the benefits of FTAs did not take off the way it was anticipated. “I think the evidence is that some of these FTAs have had very large trade diversion effects and because some of the members of the FTAs are adept practitioners of non-tariff barriers, the benefit side of FTAs has not actually picked up to the extent of the import side has," said the finance secretary.
Somanathan also explained that the government’s disinvestment policy envisages that eventually, there would be only bare minimum state-owned banks. The finance secretary also said that GST’s potential for self-policing which is being used now will help in boosting revenue.
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