Indian business leaders are engaged in frantic last-minute lobbying to persuade ministers not to hit their sectors with import tariffs as the government struggles to stabilise the fast-dropping rupee

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Indian business leaders are engaged in frantic last-minute lobbying to persuade ministers not to hit their sectors with import tariffs as the government struggles to stabilise the fast-dropping rupee. New Delhi is expected to announce the details of a plan to shore up its battered currency within days, which Arun Jaitley, the finance minister, said last week would include curbs on "non-essential" imports. The government's plans would make India the latest country to turn to protectionist measures in an attempt to boost its economy. Pakistan imposed import restrictions yesterday as it battled to restore its depleted reserves of foreign currency, while the US and China are engaged in a trade war. Mr Jaitley's announcement on Friday came after the rupee dropped to its lowest ever level against the dollar, hit by worries about emerging economies generally, and specifically by concerns over India's widening current account deficit. The deficit grew to $15.8bn, or 2.4 per cent of gross domestic product, during the April-to-June quarter, New Delhi announced this month. The rupee has lost about 12 per cent against the dollar this year. Officials are now drawing up a list of items that could fall under the new restrictions, with gold, textiles, electronics and telecoms equipment all reportedly under consideration. But business groups are urging the government to limit the number of goods that will be targeted, warning the measures inadvertently risk hurting exports. "You cannot target such a broad base of things," said one business leader who did not want to be named. "Many of these goods are used as inputs into exported goods, or in widely used domestic items. It would have the opposite effect to what they want to achieve." Telecoms companies, for example, import about 90 per cent of their network equipment, including receivers, antennas and routers. They say it would not be possible to buy such items domestically. Rajan Mathews, director-general of the Cellular Operators Association of India, said: "Mobile operators cannot immediately substitute their imports for domestically made goods. "If they have to pay more for these items, mobile users will pay more. If they cannot buy them, they will hold back on developing mobile infrastructure." One of the most sensitive items reportedly under consideration is gold, which is used across India as a common means to store wealth, and is also used extensively in jewellery exports. Colin Shah, vice-chairman of the Gems and Jewellery Export Promotion Council, said: "While they want to bring in import curbs, they also want to increase exports." He noted that the import duty on gold and silver had already been raised from 2 to 10 per cent over 15 months from March 2012. Mr Jaitley's announcement on Friday came after the rupee dropped to its lowest ever level against the dollar, hit by worries about emerging economies generally, and specifically by concerns over India's widening current account deficit The deficit grew to $15.8bn, or 2.4 per cent of gross domestic product, during the April-to-June quarter, New Delhi announced this month. The rupee has lost about 12 per cent against the dollar this year. Officials are now drawing up a list of items that could fall under the new restrictions, with gold textiles, electronics and telecoms equipment all reportedly under consideration. But business groups are urging the government to limit the number of goods that will be targeted, warning the measures inadvertently risk hurting exports. "You cannot target such a broad base of things," said one business leader who did not want to be named. "Many of these goods are used as inputs into exported goods, or in widely used domestic items. It would have the opposite effect to what they want to achieve." Telecoms companies, for example, import about 90 per cent of their network equipment, including receivers, antennas and routers. They say it would not be possible to buy such items domestically. Rajan Mathews, director general of the Cellular Operators Association of India, said: "Mobile operators cannot immediately substitute their imports for domestically made goods. "If they have to pay more for these items, mobile users will pay more. If they cannot buy them, they will hold back on developing mobile infrastructure." One of the most sensitive items reportedly under consideration is gold, which is used across India as a common means to store wealth, and is also used extensively in jewellery exports. Colin Shah, vice-chairman of the Gems and Jewellery Export Promotion Council, said: "While they want to bring in import curbs, they also want to increase exports." He noted that the import duty on gold and silver had already been raised from 2 to 10 per cent over 15 months from March 2012. Analysts warned that restrictions on steel imports would damage industries such as construction and car making. Amit Dixit, an analyst at Edelweiss Securities, said: "Steel import restrictions] would be a boon for steelmakers but downstream industries would definitely suffer." Officials must also be careful not to break World Trade Organization rules. India is already under pressure at the WTO, having been challenged by the US over six different export subsidy schemes, worth a total of $7bn. Under the WTO's information technology agreement, for example, members cannot levy import tariffs on a range of telecoms equipment. On other goods, such as textiles, India is already close to the maximum allowed tariff. "In many cases we do not have much headroom -we are already close to our bound rates," said Biswajit Dhar, an economics professor at Jawaharlal Nehru university. Mr Dhar said these rules could be bent, but only if there was an impending crisis. "We still have enough foreign currency to cover eight months' worth of imports," he said. "That is not likely to be bad enough for the WTO." CREDIT: KIRAN STACEY -NEW DELHI, SIMON MUNDY -MUMBAI LLLL DETAILS Subject: Business indexing term: Gold; Jewelry, Textiles; Exports: Telecommunications industry; Tariffs: Steel industry, International trade Subject: Exports Telecommunications industry Tariffs Steel industry International trade; Industry: 33991 : Jewelry and Silverware Manufacturing 33111: Iron and Steel Mills and Ferroalloy Manufacturing United States-US India China Pakistan Jaitley, Arun Location: People Company / organization: Classification: Name: World Trade Organization; NAICS: 928120 33991: Jewelry and Silverware Manufacturing: 33111: Iron and Steel Mills and Ferroalloy Manufacturing Financial Times; London (UK) Publication title: First page: 6 Publication year: 2018 Publication date: Sep 19, 2018 People: Jaitley, Arun Company / organization: LLL Classification: Name: World Trade Organization; NAICS: 928120 33991: Jewelry and Silverware Manufacturing: 33111: Iron and Steel Mills and Ferroalloy Manufacturing Publication title: Financial Times; London (UK) First page: Publication year. 2018 Publication date: Sep 19, 2018 Section: News Publisher: The Financial Times Limited Place of publication: Country of publication: London (UK) United Kingdom, London (UK) Business And Economics-Banking And Finance, Political Science Publication subject: ISSN: 03071766 Source type: Newspaper Language of publication: English Document type: News Source type: Newspaper Language of publication: English Document type: News . ProQuest POF GENERATED BY PROQUEST.COM Page 2 of 3 ProQuest document ID: 2122927839 Document URL: https://www.proquest.com/newspapers/india-businesses-battle-ward-off- tariffs/docview/2122927839/se-2?accountid=16720 Copyright: Copyright The Financial Times Limited Sep 19, 2018 Last updated: 2020-12-18 Database: ProQuest Central LINKS Linking Service Database copyright © 2021 ProQuest LLC. All rights reserved. Terms and Conditions Contact ProQuest Read the article "India Businesses Battle to Ward off Tariffs: Import Measures". Answer the following questions using information from the article and what you have learned from the lectures and tutorials. The total marks for this assignment is 100. It accounts for 15% of your final grade of this course. Questions 1. Discuss why the Indian government levied new tariffs on a wide range of imported goods. Can any of the trade theories explain the government's underlying motivation? (35%) 2. Discuss how the new tariffs would damage local manufacturing in India. Use an industry to illustrate your answer. (30%) 3. Based on the article, suggest strategies for multinational companies with India as a) the top export market and b) the key overseas manufacturing site in facing the new tariffs. (35%) Source: Stacey, K., & Mundy, S. (2018, Sep 19). India businesses battle to ward off tariffs: Import measures. Financial Times Retrieved from https://www-proquest-com.ezproxy.lib.hk mu.edu.hk/newspapers/india-businesses-battle-war d-off-tariffs/docview/2122927839/se-2?accountid=16720