Expected Trade Reform In Budget 2008

By: EconomyWatch   Date: 30 June 2010

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The expected trade reform in budget 2008, is assumed to bring about changes pertaining to the existing trade norms in the country. It is likely that the government would bring about changes in the duties related to the trading activities. Taxes are likely to be modified.

Decrease in custom duties on non agricultural commodities:

Expected trade reform in budget 2008 is also anticipated to decrease custom duties on non agricultural commodities. The reduction is anticipated to be from 10 percent to 7.5 percent. India is likely to take this step to abide by the norms, which it voluntarily committed to ASEAN ( Association of South East Asian Nations) standards ranging between 4.5 percent to 5.5 percent by the year 2010. As a result of this reform, custom duties levied on appliances like picture tubes, air conditioners, washing machines, refrigerators, capital goods and plastics of a specified category would be greatly cut.

ASEAN deadline:

Expected trade reform in budget 2008 is apprehended to be implemented religiously as the deadline set by the ASEAN is nearing. ASEAN norms necessitates the reduction of duties on certain articles. Fourth year in a row....India has witnessed a consistent reduction in Customs duties over the last four years. In the year 2005- 2006, customs duties were dropped to 15 percent from 20 percent. In the event when expected trade reform in budget 2008-2009 are executed, reduction in customs duties would be for the fourth year.

A decreasing trend in customs duties:

l The current fiscal year (2007-2008) witnessed decreasing duties from 12.5 percent to 10 percent.

  • Last fiscal year(2006-2007) witnessed decreasing customs duties from 15 percent to 12.5 percent.
  • Studies reveal that in the year 1996 -1997, the customs duties was as high as 40 percent.
  • The fiscal year prior to that (1995-1996) had customs duties at 50 percent. Hence, what we find is that there has been a gradual decline in the customs duties in recent years, the efforts of which were applied in the bygone years.

    It has been observed that for the past few years, India has spontaneously deducted customs duties without having been influenced by foreign sources. In other words, expected trade reform in budget 2008 is also reckoned to work on trade liberalization.

    • The road ahead....

    The industrial sector is very apprehensive about further decrease pertaining to custom duties because it is exceedingly being felt that chances of further diminution is a distant possibility in the forthcoming financial year. Due to the appreciated value of rupee, over the months, imports have become comparatively cheaper. This has led to the increase in domestic competition.

    There is a warning from FICCI that if the customs duties are reduced any further, the steps, which have been taken to rejuvenate the manufacturing sector would become null and void.

    It is being anticipated that the customs duties is likely to become 7.5 percent. Some of the sectors of the economy would be still lower. Customs duties for hand made fibers decreased to 5 percent from 10 percent. Polyester fibers saw a decrease to 5 percent from 7.5 percent. In the Budget 2007, duties were dropped to 7.5 percent from 12.5 percent for plastic as well as chemicals. This is likely to go down further in the forthcoming budget.


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