Budget 2023-24 And India’s Imports, Exports, And Current Account Deficit

Updated on: 6 February 2023 6:36 am

In the budget 2023-24, custom duties have been reduced for some important inputs to reduce costs of production of goods while the same has been increased on some others to correct the inversion and protect the domestic industry. This has been done to push domestic manufacturing and to promote export competitiveness besides attempting import substitution. The customs have mainly been reduced for some electronic parts, certain chemicals, and lab-grown diamonds, while it has been raised for some other items such as electric kitchen chimneys, automobiles, and toys for protecting local players and to correct inversion.

The reduction in customs duties on phone inputs like camera lenses might not have a big effect on the final price amid its small portion of the total cost. Additionally, the move about inputs of TVs would accelerate manufacturing and enables its overall growth. The basic custom duties on denatured alcohol also have been exempted and this will support the ethanol blending program and facilitate the country’s endeavor for the energy transition. This will also help the downstream users in the chemical industry. Also, the proposed exemption in basic customs duty on seeds used in the manufacture of lab-grown diamonds will give a boost to the industry as there is a depletion in deposits of natural diamonds and this will necessarily reduce the costs of production. The R&D grants for the same will facilitate gems and jewellery exports. The reduction in duty for key inputs on producing shrimp feed will help marine exports. To provide impetus to green mobility, customs duty exemption has been extended to import capital goods and machinery required to manufacture lithium-ion cells for EV batteries.

Customs duty on articles of precious metals such as gold, silver, and platinum has been increased from 20% to 25%. This will improve domestic production and enhance import substitution in this sector. Customs duty on jewellery has been increased to discourage cheap imports. The import duty on compounded rubber increased from 10% to 25%. As a result, the country will import less compound rubber and the demand for, and prices of rubber made in the country will rise. The import duty on compounded rubber was increased from 10 to 25% and this will reduce the import of compound rubber into the country and boost the demand and prices of the rubber produced in the country. The country's rubber production will rise even more as a result of this, which will help farmers in the rubber industry tremendously.

Back in 2021, the Government introduced Production Linked Incentive (PLI) to put the domestic manufacturing sector on track, to job creation, and to reduce import dependence in key sectors. Expectations from this budget were that the PLI scheme would be given more emphasis and the loopholes and shortcomings would be addressed but the finance minister has decided to reduce allocations to PLI in every sector and there are even massive cuts in a few sectors. Most of the sectors it deals with are struggling and the current account deficit is the result of an increase in import dependence.