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India Inc seeks curbs on Chinese imports, cheaper capital, tweak in duty structure.


Date: 30-12-2014
Subject: India Inc seeks curbs on Chinese imports, cheaper capital, tweak in duty structure
NEW DELHI: The Indian industry wants curbs on Chinese imports, correction of inverted duty structure, an import substitution policy and lower cost of capital to help boost domestic manufacturing. The suggestions were made during Make in India workshop held by the government on Monday.

Companies asked the government to increase duties within bound rates at the World Trade Organisation to protect domestic manufacturers from Chinese lowcost competition, particularly in sectors such as power equipment, capital goods and heavy industry, an official aware of the deliberations told ET.

India's trade deficit with China stands at $36 billion with exports at $15 billion against $51 billion of imports. Machinery and equipment accounted for a quarter of imports from China last year at more than $5 billion.

Bound tariff is upper ceiling on import duty allowed by WTO. While India's average bound tariff rate is 48.6%, average basic customs duty is around 14%. This gives ample space to raise tariffs in sectors where basic customs duty is lower than bound duty.

Indian companies including Larsen & Toubro also asked the government to expand scope of domestic content requirement norms to encourage local manufacturing but this has been a major point of contention between India and the US. US Trade Representative Michael Froman last month took up the issue of local content requirement with the Indian government, alleging it hit competitiveness and pushed up costs of producers and consumers.

The US had moved the WTO earlier this year over the local content requirement in the first and the second phase of the National Solar Mission, alleging discrimination against US producers of solar cells and modules.

"While MNCs (multinationals) like GE were strongly against local content requirement norms, L&T wanted the expansion of the norm (to) help Indian industry," said an official who was part of the closeddoor meeting.

Import substitution targets for the power equipment sector were among points discussed.

An industry participant told ET the government came across as being very accommodating in its demands related to an inverted duty structure and protection of the domestic market.

"A government official even went ahead to say that it was time India took a protectionist stance towards its industry," said the industry participant.

Another senior government official said DIPP has prepared a list of more items where the inverted duty structure needed to be corrected and will likely be taken up by the finance minister in the upcoming budget, a move expected to promote domestic manufacturing of final goods. In the July budget, finance minister Arun Jaitley had rectified the inverted duty structure on various raw materials and intermediate products.

The daylong brainstorming on Make in India held 18 sessions for 25 identified sectors.

These included oil and gas, capital goods and micro, small and medium enterprises (MSME) to chart a roadmap for the short and medium term to promote domestic manufacturing and enhance ease of doing business.

Source : economictimes.indiatimes.com

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