India's Prime Minister Narendra Modi has pushed up import levees. Jayanta Dey/ Reuters
India's Prime Minister Narendra Modi has pushed up import levees. Jayanta Dey/ Reuters
India's Prime Minister Narendra Modi has pushed up import levees. Jayanta Dey/ Reuters
India's Prime Minister Narendra Modi has pushed up import levees. Jayanta Dey/ Reuters

Modi raises India import duties to highest in 30 years


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Less than a month after he declared to the World Economic Forum that India was open for business, Prime Minister Narendra Modi has raised import duties to their highest in three decades, setting the stage for a protracted trade war.

As he prepares to seek re-election next year, Mr Modi has been ensnared by a global wave of protectionism that could threaten the foreign direct investments India needs to achieve double-digit growth. He has made it more expensive to import parts for automobiles, cameras, televisions, electricity meters and smartphones, risking trade disputes from allies like the US and Germany to rivals like China.

"India has taken a dramatic protectionist turn," Richard Rossow, an Indian policy expert at the Washington-based Center for Strategic and International Studies, wrote in a note. "The scale of India’s protectionist leap is surprising and likely to elicit a strong response from the United States and other major trading partners."

President Donald Trump signalled tit-for-tat duties against India’s barriers on motorcycles, while the German Ambassador to India, Martin Ney, questioned the decision to raise custom duty on the import of auto components. The US commerce department on Tuesday said it was examining imports of welded pipes from India and five other countries.

All this could add up to bad news for India at the World Trade Organisation (WTO).

"This can escalate at the WTO," said Rahul Shukla, Delhi-based executive director at PwC. "If they really want to help local industry there’s so much more that could be done, and it’s true that industry needs help. But these are the highest barriers we have seen in a long while."

India’s move comes as it faces the widest trade deficit in more than four and a half years and a resilient rupee. Data from the government on Thursday showed trade gap in January was $16.3 billion, the widest since May 2013. India’s yawning deficit with Asian powerhouse China is a matter of concern.

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Indian imports from China have soared in the past few years, outpacing exports and leaving the local industry, especially the medium and small sectors, gasping for survival. And exports from the $2.3 trillion economy have slowed at a time when the global economy is ticking higher.

Finance minister Arun Jaitley announced in his February 1 budget speech that the barriers would push the government’s flagship "Make in India" programme to encourage local manufacturing. Yet some believe the electoral costs incurred by Mr Modi after a chaotic roll out of the national goods and services tax - including significant disruptions to businesses - may have driven the government to resort to protectionism.

Indeed, a study by the Reserve Bank of India found the implementation and refund delays under the new tax regime had led to working capital constraints for firms, which in turn hurt exports in October 2017.

The barriers will remain in place for another two-to-three years to help small and medium companies, said Vanaja Sarna, chairwoman of India’s Central Board of Excise and Customs.

But the move may end up hurting local businesses, said Bipul Chatterjee, executive director at New Delhi-based think tank CUTS International.

"A hike of 15 to 20 per cent 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," he said.

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Fixture: Thailand v UAE, Tuesday, 4pm (UAE)

TV: Abu Dhabi Sports

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Engine: 2.0-litre 4-cylturbo

Transmission: seven-speed DSG automatic

Power: 242bhp

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Who are the Sacklers?

The Sackler family is a transatlantic dynasty that owns Purdue Pharma, which manufactures and markets OxyContin, one of the drugs at the centre of America's opioids crisis. The family is well known for their generous philanthropy towards the world's top cultural institutions, including Guggenheim Museum, the National Portrait Gallery, Tate in Britain, Yale University and the Serpentine Gallery, to name a few. Two branches of the family control Purdue Pharma.

Isaac Sackler and Sophie Greenberg were Jewish immigrants who arrived in New York before the First World War. They had three sons. The first, Arthur, died before OxyContin was invented. The second, Mortimer, who died aged 93 in 2010, was a former chief executive of Purdue Pharma. The third, Raymond, died aged 97 in 2017 and was also a former chief executive of Purdue Pharma. 

It was Arthur, a psychiatrist and pharmaceutical marketeer, who started the family business dynasty. He and his brothers bought a small company called Purdue Frederick; among their first products were laxatives and prescription earwax remover.

Arthur's branch of the family has not been involved in Purdue for many years and his daughter, Elizabeth, has spoken out against it, saying the company's role in America's drugs crisis is "morally abhorrent".

The lawsuits that were brought by the attorneys general of New York and Massachussetts named eight Sacklers. This includes Kathe, Mortimer, Richard, Jonathan and Ilene Sackler Lefcourt, who are all the children of either Mortimer or Raymond. Then there's Theresa Sackler, who is Mortimer senior's widow; Beverly, Raymond's widow; and David Sackler, Raymond's grandson.

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Event info: The tournament in Kuwait is the first phase of the qualifying process for sides from Asia for the 2020 World T20 in Australia. The UAE must finish within the top three teams out of the six at the competition to advance to the Asia regional finals. Success at regional finals would mean progression to the World T20 Qualifier.

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Friday fixtures: 9.30am (UAE time) - Kuwait v Maldives, Qatar v UAE; 3pm - Saudi Arabia v Bahrain

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Range: Up to 610km

Power: 905hp

Torque: 985Nm

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UAE currency: the story behind the money in your pockets
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Price, base / as tested: Dh263,235 / Dh420,000

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Fuel consumption, combined: 9.4L / 100kms

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Price, base / as tested Dh150,900 / Dh173,600

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Fuel economy, combined 6.4L / 100km