New Delhi: India has raised tariffs on 28 items exported from the US with effect from Sunday in retaliation to America’s withdrawal of preferential access for Indian products from 5 June.
The final notification of tariffs issued by the finance ministry late on Saturday night, minutes before the tariffs came into force, does not include one item that was there in the earlier list, artemia, a type of shrimp.
The commerce ministry had on Friday made public India’s intention to go ahead with imposition of duty on American products, a move New Delhi had previously deferred in the hope of striking a trade deal.
The notification seeks to “...implement the imposition of retaliatory duties on 28 specified goods originating in or exported from USA and preserving the existing most favoured nation (MFN) rate for all these goods for all countries other than USA". India had repeatedly postponed the imposition of tariffs of more than $200 million on import of US goods worth $1.4 billion since they were first announced on 20 June 2018.
The duties were in retaliation to the US decision of significantly hiking customs duties on certain steel and aluminium products. Among the targeted imports, duty on walnut has been raised from 30% to 120%, while duty on chickpeas, Bengal gram (chana) and masur dal has been raised from 30% to 70%.
“With the amendments notified, imports of certain products originating in USA would no longer be eligible for a lower rate of customs duty. This would result in a higher rate for goods imported from USA vis-a-vis other countries. These retaliatory duties were included long ago but implementation of these was postponed for some time," said Abhishek Jain, tax partner, EY.
The strain in trade ties between the two economies comes at a time when global economic growth rate is projected to slow down as trade tensions among major economies such as between the US and China weigh on business confidence and investments. The International Monetary Fund’s world economic outlook had in April downgraded global growth to 3.3% for 2019, down from the 3.5% it had forecast in January. The Reserve Bank of India had also said earlier this month in its second bi-monthly monetary policy statement this fiscal that weak global demand because of escalation in trade wars may further impact India’s exports and investment activity. The Central Statistics Office had in February lowered its growth estimate for Asia’s third-largest economy for FY19 to 7% from the 7.2% estimated earlier.
Experts, however, said the disruption caused because of trade wars among major economies offered India a chance to improve its share in the world market.
India’s potential to make further gains in global markets should be tapped, Rajiv Kumar, vice chairman of federal policy think tank NITI Aayog said on Saturday. “Given what is going on in the global economy today, this is the time we should make the effort to benefit from the gaps emerging in the supply chian in global markets," he said Kumar.
Prime Minister Narendra Modi, who returned to office for a second term with a landslide victory last month, on Saturday urged chief ministers to optimise their manufacturing and export potential. This sentiment is likely to get reflected in the Union budget for FY20 that finance minister Nirmala Sitharaman will present in Parliament early next month.
News agency PTI reported that India may get about $217 million additional revenue from the retaliatory tariffs on items imported from the US.