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India need to reconsider import tariffs to support MSME exporters : Suman Bery

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NEW DELHI : NITI Aayog Vice Chairperson Suman Bery has said India should consider imports as an essential strategy to boost export competitiveness, instead of worrying about its consequence on the trade deficit. Bery made his remarks at an event on Saturday to release a study on ‘India’s Export Competitiveness’ by MVIRDC World Trade Center (WTC) in Mumbai.

“For a relatively open economy like India, competitiveness is linked to imports. In certain value chains such as precision engineering, India is dependent on imports. It is tempting to impose tariff on imports to reduce the trade deficit. However, a tax on imports is a tax on exports and hence there is a need to reconsider import tariffs to support our MSME exporters,” a statement by WTC quoted Bery as saying.

India, which has a surplus on services account and remittances in the balance of payment, has had a reasonably manageable trade deficit in the past, except in the current circumstance when energy prices are abnormally high, he noted. “There is little reason to consider a significant trade deficit to GDP ratio as worthy of policy attention.”

India’s trade deficit had doubled to $70.8 billion in April-June 2022 vis-a-vis $31.4 billion during the year-ago period due to an increase in the import bill of crude oil, coal, edible oil and precious metals.

Bery asserted that India should not be too rigid in the distinction between merchandise exports and services exports as a lot of service component is embodied in merchandise exports as well.

“Various digital initiatives that facilitate exports represent the embodiment of services in goods exports. Trade facilitation by itself is services intensive. So, it is not appropriate to draw a sharp distinction between goods and services exports in the supply chain. We need to identify the services provided by MSMEs that are embodied in goods exports,” he said.

Vijay Kalantri, Chairman, MVIRDC WTC Mumbai in his remarks suggested the government for a task force under NITI AAYOG to revive local MSME units that became sick due to unfair competition from imports, especially in printed circuit boards, white goods and electronic components, the statement added.

“This is the right time to revive our MSMEs under the Aatmanirbhar program by rethinking import substitution. India should also reduce the cost of logistics, which stands around 8 per cent of GDP to less than 6 per cent so that we can compete in the international market,” said Kalantri.

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