The commerce ministry has put on hold plans to cut tariffs for imports of tech products from the European Union after the IT ministry raised concerns, saying such a move could hit nascent local manufacturing of electronic goods, two government officials aware of the development said.
India’s offer of tariff concessions was aimed at settling a trade dispute at the WTO with its second largest export market.
The commerce ministry was weighing the option to lower the tariffs for the EU as it believes that the influx of cheap Chinese goods—and not those coming in from Europe—is the key threat to the domestic electronic sector, which is a strategic area under the flagship production-linked incentive scheme. The original Indian tariff, though aimed at Beijing, had the unintended consequence of affecting imports from Europe, New Delhi clarified after the EU moved the World Trade Organization. Subsequently, a WTO panel ruled against India and the two entered into settlement talks. The EU claimed technology exports worth of €600 million to India were impacted annually due to tariff on information and communication technology (ICT) products.
However, the Ministry of Electronics and Information Technology (MeITY) which is pushing for domestic capacity- building was not on board with India’s move, saying production and exports of ICT products were showing signs of picking up with US tech giants such as Apple beginning to increase sourcing from India.
The first official, with MeitY, said tariffs on certain ICT products were levied with the intent to create export-led local manufacturing which was taking shape. This person said it was not possible to levy a different tariff rate for a particular region or country for ICT products.
The second official, who is with the commerce and industries ministry, said that offering concessions to the EU was the logical option as Chinese imports are the chief concern. “But we did not move ahead with the plan as MeiTY was not on board,” this official added. “The commerce ministry is undertaking extensive stakeholder consultation on all chapters (of the free trade agreement, or FTA) being negotiated and we refrain from moving forward with any decision without having the concerned department or industry onboard. We had also proposed to offer concessions to EU in the FTA but there still is time before the EU FTA is finalized, so that proposed solution also hasn’t materialized,” the official said.
