Effective import tariff went up in late 90s

indian industry may be complaining that the government is not giving them enough time to adjust, while reducing protection. but contrary to common perception, the governments in the late nineties have actually raised the protection levels for indian producers during the second half of the nineties. planning commission estimates indicate that the effective average import duty has gone up by about 10 percentage points during the last five years — from 24.6 per cent in '96-'97 to 35.1 per cent in the current year. the average import duty rate had steadily fallen during the first half of the nineties from 72.5 per cent in '91-'92. but since then, the effective tariffs increased due to imposition of various surcharges and special duties, which are taken into account in the planning commission's calculations. these surcharges, thus, continued to give added protection to the industry even as the more visible peak tariff rate was brought down from 50 per cent in the mid-nineties to 35 per cent now. incidentally, the commission's estimates of effective tariff rates exclude the countervailing duty. similar measures for the other asian economies are much lower. average effective tariff is 14.3 per cent in indonesia, 7 per cent in korea, 9.4 per cent in malaysia, 8.5 per cent in philippines and 18.5 per cent in china. the increase in india's effective tariff rates during '96 to '01 is quite spectacular in consumer goods and intermediate goods — where it went up from 39 to 67 per cent and from 22 to 35 per cent respectively. in case of capital goods, it moved up only marginally — from 29 to 32 per cent. effective duty rate also increased in agricultural items from 15 per cent to 58 per cent. it is interesting to note that another measure of average import duty rates — the collection rate — has behaved in contrast to the trends seen in the planning commission estimates. collection rate is defined as the ratio of realised import revenue (including the surcharges and cvd) to the value of imports. it has fallen in the second half of the nineties from 31 per cent in '96-'97 to 24 per cent in '99-'00. this contrasting trend, together with the collection rate being lower than the other measures, indicates two things. first, despite higher protective tariffs, certain exemptions could have resulted in lower realised import revenue. and second, certain high tariff items could have very negligible quantities of imports — the case of tariffs being too high to choke off the imports. thus, those high tariff lines influence the average duty measure, but not the collection rate. the finance minister had, in the recent budget speech, indicated a desire to move to a peak duty rate of 20 per cent in three years. a report of the planning commission's task force on employment has welcomed this statement as a productivity enhancing measure. it says: if the target for india is taken as a weighted average of 10 per cent to be achieved at the end of three years, it requires a reduction of approximately 8 percentage points per year. one does not know, however, whether the government would actually go in for that kind of a reduction in protective tariffs, or whether the reduction in tariffs would be just limited to the peak tariff rate, as during the later half of the nineties.

Effective import tariff went up in late 90s

INDIAN industry may be complaining that the government is not giving them enough time to adjust, while reducing protection. But contrary to common perception, the governments in the late nineties have actually raised the protection levels for Indi...

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