The government has decided to license these imports after finding that higher duties have been ineffective in reducing the amount of goods coming into India, even as they raise costs for domestic industry. The licence requirements serve as non-tariff barriers that discourage imports. According to experts, cheap imported goods have been finding their way into the country through the misuse of free trade agreement route.
NEW DELHI: Imports of furniture, toys and sports goods are likely to require licences soon, a measure the government hopes will reduce imports and encourage domestic production, said people with knowledge of the matter. India has already imposed licensing requirements for tyres and colour TV imports, a big percentage of which comes from China.
The government may also raise import duties for certain products to their bound rates to make imports costlier. Bound tariffs are the ceiling rates specified at the WTO beyond which countries cannot raise duties.
The government has decided to license these imports after finding that higher duties have been ineffective in reducing the amount of goods coming into India, even as they raise costs for domestic industry, officials said. The licence requirements serve as non-tariff barriers that discourage imports. Cheap imported goods have been finding their way into the country through the misuse of free trade agreement route, officials said.
"Non-duty actions like import curbs are one of the main actions available to the government as many of these are coming at low duty and which cannot be controlled through increased tariffs," said an official.
The products for which import restrictions are being considered are part of the 20 industrial sectors in which India has a manufacturing advantage and can attract investments, as identified by the government.
These include standard and special furniture, air-conditioners, leather, footwear, agro-chemicals, ready-to-eat food, steel, aluminium, copper, textiles, electric vehicles, auto components, TV set-top boxes, CCTVs, sports goods, ethanol & bio-fuels, and toys.
This is not a unilateral exercise and consultations are on with industry on ways to reduce imports, the official said. "So, industry will be able to rapidly move to domestic manufacturing without consumers seeing any price escalation," the person added.
The government had launched the Atmanirbhar Bharat Abhiyan, or self-reliant India programme, in May as part of a strategy to reduce dependence on imports and revive the economy in the wake of the Covid-19 pandemic.
Industry has sought transition time and the issuance of ad hoc licences for tyres and TVs to facilitate traders, as goods worth several crores of rupees are in transit or advance payments have been made or orders have been placed. Televisions worth Rs 600-700 crore are imported into India every month, sources said. Companies such as Samsung, Vu, Xiaomi and Cloudtail, a popular seller on Amazon.in, are among the leading importers, they added.
Industry sources also added that imports worth nearly $400 million were coming from Vietnam, followed by over $300 million from China, prompting another look at the free trade agreement India has with the Southeast Asian nation and whether it's being misused.
"There's going to be an additional layer of compliance to be fulfilled, which in our understanding could be onerous and would be possible only for those products for which we do not have capacity or expertise in-house or for players demonstrating value addition," said Divakar Vijayasarathy, founder and managing partner, DVS Advisors LLP.
The procedures are yet to be notified, he said. Smaller companies, which merely import goods and attach labels in India, may find the going especially difficult, he said.