India’s move to hike custom duties on dozens of products to promote its Make-in-India drive has drawn criticism from the businesses and diplomats in the U.S. who are urging the country to cut tariffs to reduce tensions over trade.
In December, the government increased import tax on electronic products like mobile phones and television sets and on 40 more items in the budget this month that included varied items like juice, sunglasses and auto components. The step is aimed towards providing a chance to the local industries to evolve, create jobs and increase the share of the manufacturing sector in the GDP, which is currently around 15 percent, to a quarter.
Defending the decision to raise the duties, a senior finance ministry official said it reflected a trend in other parts of the world. “When all the major economies, including the U.S. and China, are following protectionist policies, why are we being questioned,” the official said.
Bilateral trade between India and the United States has grown to about $115 billion in 2016 from $20 billion in 2001. The United States buys close to a fifth of India’s goods and services exports and its trade deficit has widened from $13 billion in 2006 to $31 billion in 2016.
For the past one year, the U.S. Congress has been putting great pressure on India to undo economic barriers and now the House Republicans have raised the issue of the new round of duties with New Delhi. “We conveyed our concerns to the Indian government last week to raising tariffs above WTO rates – especially as it relates to information technology,” a Republican aide in Washington told Reuters.
Earlier, Trump had expressed disapproval over duties on Harley-Davidson motorbikes, after which Modi ordered a cut to 50 percent from 75 percent for high-end bikes.
But Trump, referring to zero duties for Indian bikes sold in the United States, said he would push for a “reciprocal tax” against countries that levy tariffs on American products.