India Insight

India’s TV import duty taxes travellers… and grey markets

India on Monday imposed a 36 percent duty on flat-screen televisions that travellers bring back from other countries, seen as another step to support a falling rupee. The move, however, will do little to help the economy but will cheer television manufacturers in India and hit grey markets, experts said.

India has taken various measures in recent months to deter the import of commodities such as gold as Asia’s third-largest economy tries to tamp down its current account deficit and a weak rupee that touched record lows below 65 per dollar this week.

The duty will not have significant effect on the rupee or on the current account deficit, which is estimated at 3.7 percent of the gross domestic product this year. With only seven months’ worth of foreign exchange reserves, India is taking a number of measures to narrow the gap between its imports and exports, though trying to discourage television purchases in foreign currency might not do much more than set an example.

“It is more symbolism that we are going to tax or discourage the import of luxury goods so maybe the next thing that will come will be (a duty on) import of other things like wine or cars,” said D H Pai Panandiker, president of RPG Foundation, a private think tank. “It’s such a small import that it is not going to make a very big difference to the current account deficit.”

Passengers last year brought in more than a million television sets from other countries, according to government estimates, taking advantage of a baggage allowance that exempted units costing up to 35,000 rupees ($547) from any duty.

Bold moves, smart timing on rail fares, diesel proposal

(Any opinions expressed here are those of the author, and not necessarily of Thomson Reuters)

The railway budget in India is usually presented in parliament a few days before the main budget in February. In a rare move, the railways minister on Wednesday announced an across-the-board increase in passenger fares starting Jan. 21, the first such step in nine years.

The increase is significant. A ticket for an air-conditioned coach with three-tier sleeping berths in a mail or express train from New Delhi to Mumbai will cost 1,205 rupees, up 13 percent from 1,065 rupees.

Petrol price hike – oil retailers’ logic fails to convince

India’s state-run oil marketing companies launched a media blitzkrieg on Tuesday to justify a recent price hike in petrol prices and came out strongly against allegations of profiteering at the consumers’ expense.

Their logic, however, failed to answer why, while being entirely dependent on state subsidy, they are still eager to reward shareholders with rich dividends.

Here is the background.

A flurry of protests swept India recently after oil retailers announced the steepest price rise in the country’s history, leading to a partial rollback.

The rupee’s fall from grace

Indian milk and dairy products producer Amul’s campaign has a new subject — the rupee.

The newspaper advertisement features the iconic Amul girl, in her polka dotted red dress, in a boat made of the rupee, about to sink in turbulent waters. She says ‘mujhe mere rupee se bachaao!’ in Hindi. Loosely translated into English, it would mean ‘save me from my rupee.’

The tagline, tongue in cheek, says ‘valued highly’.

The Amul mascot’s angst today reflects that of investors who have so far been bullish on the India growth story.

RBI chief challenges “group wisdom” on economy

India’s central bank chief Duvvuri Subbarao may not be an established economist or a career banker, but he has a rare set of skills — of an administrator, non-conservative thinker with degrees in physics and economics — who can take on the group wisdom of economists and markets.

While delivering an address on “Role of Economics in Policy Making” at the golden jubilee function of the Indian Economic Service — the career economists in Indian administration — he said they were challenging the wisdom of “celebrated” economists and economic models.

That may be the reason why Subbarao was probably alone in opting for a 50 basis points rate hike in July while the majority of panel members favoured a pause in monetary tightening or at the most a 25 basis points rise in rates.