In an attempt to stop the rupee from weakening more against the US dollar, India has said that it will be increasing the import tariffs on various electronics and communication devices. This is the second move that has been announced in last two weeks and by reducing import barriers, the government eyes to reduce the import of “non-essential” items.
The latest set of changes in tariffs do increase the possibility of increasing trade tensions with the United States, China and other countries from where electronics and communication devices are regularly imported. Companies like Cisco Systems, Huawei Technologies, Nokia, Samsung Electronics, Ericsson and ZTE would be hurt the most by the new set of changes.
As we mentioned earlier, the step is being taken to restrict the slide of Rupee against US dollar — which have been more than 14% this year. One among the major reasons for the fall of the value of Rupee against US Dollar is the hike in the price of crude oil. Importing crude oil has become a way more expensive affair than what it was earlier. Coupled with various domestic factors, it has led to the slide of Rupee against UD Dollar.
The Indian government has also listed a number of items that can be impacted with the import tariff increase. These include smart wearables, ethernet cables, Voice over Internet Protocol equipment and phones, and more.
Neil Shah of Counterpoint pointed out another effect of the rise in import tariff as he told Reuters that besides foreign technology giants, Indian telecom companies could also be potentially be hurt by the move. This includes Reliance Jio, Idea and Bharti Airtel.
According to Reuters, Shah said, “This will slow down the roll out of high-speed broadband which uses optical fiber and LTE networks.” He also added that domestic telecom equipment makers like Tata Teleservices could benefit from the move.
The move promoted Prime Minister Narendra Modi government’s ‘Make in India’ program. In December last year, India increased the import tax on mobile phones and televisions and in February this year, 40 more items joined the list.
Prior to the announcement, last month import tax was increased on 19 “non-essential items.” These items included refrigerators, footwear, air conditioners, etc.