The widened current account deficit (CAD) seems to be worrying the government. To address this issue, the government on Thursday, raised tariffs on some telecom equipment and components, as per media reports. These hikes are set to go on floor from today. Moreover, the latest set of equipment includes those utilised for industrial use and components for mobile devices.
Thus, telecom products including base stations, optical transport equipment, combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS), Optical Transport Network (OTN) products and IP radios will now face a custom duty of 20%, instead of 10%. Further, other telecom products which enjoy zero duty could face a customs duty of 10%.
In FY18, India imported $21bn worth of electronics, mostly comprising mobile phones and its components. This makes up the third-biggest chunk of our import bill, after crude oil and gold.
Thus, in this year alone, the Indian government has imposed restrictive measures six times. Incidentally, India's CAD has deteriorated to 1.9% of GDP in FY18, as opposed to 0.6% in FY17. What’s more, it is forecast to rise to around 2.8% in the current year.
Meanwhile, by hiking rates, the government is trying to boost PM Narendra Modi’s pet scheme “Make in India,” by forcing telecom companies to acquire critical network gear locally and reduce the sector’s dependence on imports especially when the rupee is at an all-time low.