India tells US it will lose over $ 3 billion annually if it scraps duties on ICT products

The US President Donald Trump and commerce secretary Wilbur Ross have hit out at India for creating “tariff barriers” to trade. However, the Indian Government has told US that if it agrees to the US demand it will lose as much as $3.2 billion a year in customs revenue. So it is not viable for New Delhi to waive the up to 20% duties on the seven ICT products, including smart watches and high-end cell phones, the New Delhi is understood to have told Washington.

Potential revenue loss will be way above export incentives offered by US

Its potential revenue loss, says New Delhi, will be much above the export incentives of $190 million that the US offered India in FY18 under the so-called generalised system of preferences (GSP). Even that incentive amount might have dropped further in FY19 when the US first dropped 50 items from the list of items eligible for incentives and later, in March, announced the withdrawal of the programme in 60 days.

Also, even if India scraps or trims the duties, only China and Hong Kong will be the biggest beneficiaries of the move and the US will hardly gain, New Delhi has conveyed to Washington. This is because the US made up for only 2% (or $415 million) of India’s imports of these seven products worth $20.5 billion in FY18.

Instead, New Delhi is willing to cut duties on those ICT (information and communications technology) products that will be of greater interest to the US, said the source. The potential customs revenue loss estimate is based on India’s imports of such items in FY18, added the source.

Ross on Tuesday flayed India for imposing “not justified” tariff on ICT products (20%), motorcycles (50%) automobiles (60%) and alcoholic beverages (150%).