India Mulls Import Duty Cuts to Curb Inflation.

DAVOS, Switzerland: India is concerned about high global commodity and oil prices and will consider cutting import duties on more food products to curb inflation gripping Asia's third-largest economy, its trade minister said.

India is already allowing duty-free imports of crude vegetable oils and is likely to continue to do so as food price rises remain in the double digits, a worry that has prompted foreign fund managers to pull out of the country's equities.

Asked if India would consider cutting more import duties, Indian Trade Minister Anand Sharma told Reuters late on Saturday at the World Economic Forum in Davos, Switzerland: "Yes, when there is a shortage and the inflation is high."

"Like where there is a shortage and we don't produce enough, it is but natural (to cut import duties). Why should we import at such higher prices and then subsidize it for the public distribution system?"

Food inflation in India inched up in mid-January to hit 15.57 percent due to unseasonal rains hitting output of vegetables, such as onions, potatoes and tomatoes -- key ingredients in Indian cooking.

Analysts are forecasting more interest rate rises by the Reserve Bank of India, which on Tuesday raised policy rates for the seventh time since last March.

Global crude prices soaring toward $100 a barrel are also another concern, Sharma said, due to worries that India's nagging trade deficit could widen further.

"Well, everybody would be (worried), especially those dependent on imports," Sharma said. "It has been a matter of concern because in any case, we have a trade deficit."

India's goods trade deficit has been wide as it needs to import large quantities of iron and steel, chemicals and machinery to fuel a rebound in industrial growth.

The trade deficit can exacerbate India's current account deficit and adds to the need for India to attract fund inflows to finance the gap.

Policymakers have said the deficits were a concern but manageable. However, some have said the shortfalls make it easier for India to absorb a surge in inflows of capital -- the product of super-loose monetary policy in advanced economies.

Source : economictimes.indiatimes.com