The US has asked India to remove or substantially cut import duties on information and communication technology (ICT) products, including premium mobile phones and smartwatches. It has also sought a rollback in the price curbs on medical equipment.
Sources told The Financial Express these demands have thrown off the trade package negotiation that has been ongoing between the two countries for months, as India may not be able to accommodate these demands.
The US is trying to use its so-called generalised system of preference (GSP) regime as leverage to ask for these cuts, sources added. Under the GSP, the US is importing certain products from poor or developing countries, including India, at concessional tariffs.
The government believes cutting these duties will go against its Make in India initiatives and cost it customs revenue. This move may also increase non-essential imports, which the Centre wants to cut down.
The Trump administration wants India to scrap or cut duties on items including mobile phones priced over Rs 10,000, parts of phones, smart watches, equipment for telecom networks such as switches and routing machines, radio receivers and select print circuit assemblies. At present, these items have 20 percent customs duties.
This move puts India in a fix since there is no formal agreement between New Delhi and the US about pruning duties. Therefore, India would have to grant the same reduced import duties to other countries like China and South Korea that account for a bulk of its $20.5-billion imports of the above-mentioned ICT products.
Last fiscal, India earned $3 billion in customs revenue from these ICT products. The US contribution to this was only $0.4 billion as the ICT market is mainly dominated by China, Korea and Japan.
The US also wants India to forgo price curbs on medical equipment, including stents as India is a major market for stents. In the previous fiscal, India imported equipment worth $1.6 billion, 10 percent more than the previous year.
India has put off its retaliatory attack to Trump's imposition of extra duties on its steel and aluminium for the fourth time, as it hopes for a mutually agreed trade package. Although, Trump removed nearly 50 Indian goods from the list of items eligible for concessional duties under the GSP regime.
The US aims to reduce a trade imbalance with New Delhi and get more access to the Indian market by using the GSP scheme, as India tried to get exemptions from additional duty on steel and aluminium.
Source: moneycontrol.com