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Modi Raises Import Duties- Setting the Stage for a Protracted Trade War

PM Modi declared less than a month before that India was open for business. But his recent action says otherwise.

India has raised import duties to their highest in three decades, which might ignite a protracted trade war.

As Modi government is preparing for next year’s election, he has been ensnared by a global wave of protectionism that could threaten the foreign direct investments that India aims to achieve double-digit growth.

Indian Government has made it more expensive to import parts for automobile, camera, televisions, electricity meters, smartphones. It is likely to raise trade dispute with allies such as the United States and Germany.

President Donald Trump signaled tit-for-tat duties against India’s barriers on a motorcycle, while German Ambassador questioned the decision to raise custom duty on the import of auto components.

The U.S. commerce department said it was examining import of welded pipes from India and five other countries.

High Barriers

Arun Jaitley, Finance Minister of India announced in his Feb 1 budget speech that barriers would push the government’s flagship ‘Make in India’ program to encourage local manufacturing.

The barriers will remain in place for another two-to-three year to help small and medium companies.

A hike of 15 to 20 percent is not much for Chinese and South Korean companies — they can easily absorb it. This will end up hurting Indian competitiveness more than the government imagines.

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