Exclusive: India's budget seen raising import duties by 5%-10% on dozens of items, sources say

[January 18, 2021]  By Aftab Ahmed and Manoj Kumar

NEW DELHI (Reuters) - India is considering hiking import duties by 5%-10% on more than 50 items including smartphones, electronic components and appliances in the upcoming budget, three government sources privy to the discussions told Reuters on Monday.

The move to increase import duties is part of Prime Minister Narendra Modi's self-reliant India campaign that aims to promote and support domestic manufacturing, said the sources, who asked not to be named as the discussions are not public.

One of the sources said the government was seeking to target additional revenue of about 200 billion to 210 billion rupees ($2.7 billion to $2.8 billion) from the moves, as it looks to shore up revenue amidst the pandemic-driven slowdown that has stung the economy.

Two of the government sources also said the duty hikes could impact furniture and electric vehicles, potentially hurting the likes of Swedish furniture maker Ikea and Tesla, which is planning to launch its cars in India this year.

The officials, however, did not specify how much of a hike was planned on furniture and electric vehicles.

Both Ikea and Tesla executives have previously expressed concerns about the steep duty structure their products already face in India.

The list of items likely to attract steeper duties is set to include appliances such as refrigerators and air conditioners too, three of the sources said.

The finance ministry could not be reached by telephone and did not reply to an email seeking comments.

India's Prime Minister Narendra Modi speaks to the media inside the parliament premises on the first day of the winter session in New Delhi, India, November 18, 2019. REUTERS/Altaf Hussain/File Photo

India's finance minister will on Feb. 1 unveil the government's annual federal budget for the 2021-22 financial year, which begins April 1.

The sources said the proposals may still be tweaked further before they are finalised.

Finance Minister Nirmala Sitharaman will unveil the budget on Feb. 1 amid the shadow of a projected economic contraction of 7.7% for the current fiscal year.

India has in recent years taken a series of measures that industry executives say discriminate against foreign companies. Government officials say such taxes are essential to promote India as a destination for local manufacturing and to support domestic businesses.

"This is part of revenue raising and Atmanirbhar Bharat (self-reliant India) plan," said one of the government sources.

Last year, India raised import taxes on a wide range of products such as footwear, furniture, toys, electrical and electronics items by up to 20%.

(Reporting by Aftab Ahmed and Manoj Kumar; Editing by Aditya Kalra and Alison Williams)

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