India: Cheap imports entering via ASEAN trade pact may hit Make-In-India

  • India’s big plan to boost ‘Make in India’ through higher import duties has encountered turbulence, with cheap products from overseas being routed into the country by misusing the freetrade agreement with the Association of South East Asian Nations.
  • The Directorate of Revenue Intelligence, or DRI, is enquiring into imports of mobile phones and other telecom and IT equipment under the FTA route after allegations of abuse.
  • The idea was to encourage ‘Make in India’ by disincentivising imports. However, some exporters are said to have started using Asean countries to route their exports to India to evade higher duties.
  • What has rung alarm bells in the government is the entry of goods such as mobiles from China via an Asean member country without any substantial value addition, in violation of rules of origin, another government official said.
  • The government has tried to incentivise the making of mobile phones in India through the phased manufacturing plan and does not want its nascent success to be hurt by such instances and is keen on rectifying the situation promptly.
  • About 120 mobile phone manufacturing units have stated operations in India. The free trade pact between India and Asean allows import of goods at zero or concessional customs duty from a member-country if reasonable value addition has been carried out there. The rule requires a 35% value addition, without which India can deny duty benefits.
  • This is not the first time that abuse of the rule of origin has come to the fore. The DRI has investigated abuse under India-Thailand, India-South Korea and India-Asean FTAs.

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