To incentivise domestic value addition and promote the government’s ambitious programme, ‘Make in India', India’s Finance Minister
announced a slew of tariffs in his Budget 2018. The announcement received mixed reactions. While some rejoiced, many questioned the government's intention.
Regardless of the Prime Minister’s
speech at the World Economic Forum 2018, is India advocating protectionism to defend globalisation? To answer this question, take for example the Budget 2018 itself. Pundits have
enlisted the products that were being affected by the government's move, highlighting those where consumers might have to shell out more and those where they might have to shell out less. However, a deeper look into the
budgetary document suggests that there is more than what meets the eye.
Though several chapters in the budget see no change in the Basic Custom Duty (BCD) of its constituting products, however, these chapters, as seen in the table below, constitute only a quarter of India's total imports.
| Year |
Imports Not Affected* |
| 2017 |
23% |
| 2016 |
24% |
| 2015 |
24% |
| Source: WITS. *India’s imports of those Chapters where there is no change in the constituting product-BCD. These include Chapters 1-7, 9-14, 16-19, 22-26, 28-32, 35-38, 41-47, 49, 51-63, 65- 67, 72, 74-83, 86, 88, 89, 92, 93, 97. Chapter 98 in the budgetary document has been excluded in the above calculations as data is not available on the same. Imports data collected at HS2007. |
On the other hand, several chapters in the budget see changes in the BCD of its constituting products. However, the information surrounding the change is such that it leaves room for interpretation on which products is the BCD-change applicable. For example:
- Under chapter 70, the Budget proposes to change customs duty on solar tempered glass or solar tempered (anti-reflective coated) glass for manufacture of solar cells/panels/modules. Product HS-code (Harmonized System of coding) is not provided. While broad product descriptions may appear adequate to determine the product on which the BCD-change is applicable, lack of HS-codes only leaves room for interpretation. Similar faith being seen in chapter 15, 71, to name a few, where a broad product description is available at best.
- In some cases, such as chapter 15 in the budget, lack of HS-codes can be to some extent overcome by the details provided in the cited 'reference notification'. However, this is not always the case where as seen in chapter 70, the cited 'reference notification' (S.No.340 and S.No.341 of notification No.50/2017-Customs, dated 30th June 2017) provides information identical to that of the budget. With no additional information in the reference notification that may give way to the identification of HS-codes, the traceability of the products on which the BCD-change is applicable continues to be open to interpretation.
- BCD-changes in some instances where as seen under chapter 70, are subject to caveats such as an ‘actual user condition’. However, there is no information on the actual user the BCD-change is applicable to. Once again, the applicable BCD-change is open to interpretation.
- Not all products where BCD-change are proposed not have a HS-code. Yet, it is difficult to determine the product proposed for BCD-changes because of the broad description of products that are exempted from the proposal. For example, under Chapter 85, tariff rate of BCD for goods falling under tariff items 85291099 and 85299090 is being increased from 10% to 15%. However, exception to this BCD-change are ‘parts of goods of heading 8525, 8526 and 8527, falling under tariff items 85291099 or 85299090’. Given the broad product description of exempted products, it is unclear on which products under 85291099 and 85299090 is the BCD-change applicable. Similar faith being seen across several products under chapter 84 and 85, amongst other chapters and their constituting products.
The above examples highlight the fact that unclear product information leaves room for interpretation of the product(s) on which the BCD-change is applicable. As a result, it is challenging to quantify the value of global imports into India as well as identify the products and countries that are affected by the BCD-change. India’s obscurity in providing adequate required information leaves the country’s business environment in conundrum especially given the global value chain which India is a part of. For Indian firms and multinationals operating in India, the obscurity is rather expensive as they would see their costs go up the hard way, through bureaucracy and corruption manifested in higher costs of doing business. Not to mention, the impact on businesses from international ramifications where inconsistencies in identifying India’s stance means retaliatory tariffs and/or a complaint against India being lodged by India’s trading partner at the World Trade Organization (WTO), all of which would not exist otherwise.
Hidden in plain sight, data inconsistencies are where India’s protectionism lies. India’s vagueness in providing accurate information around the punitive measures is a bigger threat than the announced punitive measures. It does more harm than good to the very same businesses India is trying to help through these imposed tariffs. Despite India’s commitment to Open Government Data, the Union Budget 2018, unfortunately, is not the first government document where trade data is provided in the most obscure fashion at best (for example see
here). In fact, the Directorate General of Commercial Intelligence and Statics under the umbrella of Ministry of Commerce, charges user for downloading India’s Merchandise Trade. This in principle stands against India’s commitment to opening government data for public use as stated on
https://data.gov.in/about-us.
It is time that India opens complete accurate interoperable trade data in usable formats along with necessary metadata, a tool for trade that should be there but is not available so far.
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