The commerce ministry is not in favour of cutting or eliminating customs duties on seven categories of ICT products, including high-end mobile phones and smart watches, as demanded by the US citing revenue loss and adverse impact on Make in India initiative, sources said.
Moreover, the duty cut will not have any tangible benefit for American manufacturers as the US is not a major exporter of these products to India.
India and the US is negotiating a mutually agreeable bilateral package on a number of contentious issues. Under these talks, the US is pressing for reduction or elimination of customs duties on these seven ICT (information and communication technologies) products.
“However, the US demand would have adverse implications for revenue generation, forex reserves, and also on the Make in India drive,” they said.
In 2017-18, India’s imports of these seven tariff lines (or product categories) stood at USD 20.5 billion and the duty revenues generated on these imports amount to about USD 3.2 billion.
On the other hand, America’s exports of these items to India in 2017-18 were only USD 415 million, which is about 2 per cent of India’s total imports of these products in that fiscal.
The other items on which the US is demanding reduction includes telecom network equipment such as switches and routing equipment; radio receivers; high-end mobile phones costing over Rs 10,000; mobile phone parts, certain print circuit assemblies and smart watches.
The sources also stated that under the World Trade Organisation (WTO) norms, it would be not possible for India to extend these benefits only for the US.
“In this background, there is a need to workout some other mechanism to resolve the issue as the current proposal made by the US would not have the desired outcome or any fundamental advantage to America,” they added.
India has in the recent past increased customs duties on these products with a view to promote domestic manufacturing.
In October, the government hiked import duty on certain communication items, including base stations, to up to 20 per cent as part of efforts to check a widening current account deficit by curbing non-essential imports.
India has also announced to increase customs duty on 29 products, including pulses, iron and steel products, imported from the US as a retaliatory action against the tariff hike by Washington on certain steel and aluminium products.