India’s inverted duty structure is making locally produced goods uncompetitive compared to products imported to India, according to a survey.
As The Economic Times reports, India’s inverted duty structure means that finished goods are taxed at lower rates than raw material. This arrangement has an adverse affect on manufacturers because they have to pay a high duty on raw materials, while completed manufactured goods from abroad pay a lower duty.
According to the survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), this situation has been reported by nine manufacturing sectors, including aluminium products, capital goods, cement, chemicals, electronics, paper, steel, textiles and tyres.
The effect of the inverted duty structure has been exacerbated by several regional and bilateral Free Trade Agreements (FTAs) that India has made with Japan, ASEAN, South Korea and others.
The inverted duty structure, coupled with concessions given to trading partners under FTAs means that some locally products can’t compete with imports.
The findings of the FCCI survey were submitted to India’s sectoral Ministries, Tariff Commission, National Manufacturing Competitiveness Council (NMCC), Department of Industrial Policy and Promotion (DIPP) and Planning Commission for necessary action.