NEW DELHI (TIP): Finance minister P Chidambaram indicated that the government may increase customs duty on luxury goods as well as those that can be manufactured locally as part of a fresh assault against non-essential imports to rein in the current account deficit (CAD). “There is no specific proposal. We have only done gold. We are looking at some more import compression and at various scenarios on how CAD will play out… We have to look at goods which we can produce and therefore need not import in such large quantities or goods which are clearly non-essential, which some may call luxuries,” the minister, who completes a year of his return to the finance ministry, said in an interview.
Chidambaram did not elaborate on the products on which duties will be raised, but the move will leave a bigger dent on your pocket. The government has been grappling with a sharp economic slowdown, rising prices, a weak currency and a downbeat mood in industry. While it has announced measures to revive growth, which slowed to a decade’s low of 5%, global economic uncertainty and the sharp swings in the rupee have added to its headache. The finance minister also blamed US Federal Reserve chairman Ben Bernanke for the rupee’s volatility and there were some harsh words for former comptroller and auditor general Vinod Rai as well.
Asked if judicial activism and the CAG’s reports had contributed to the overall pessimism, the minister said, “To a considerable extent. The former CAG did grave damage to the system. He exceeded his jurisdiction and exceeded his mandate.” At the same time, Chidambaram said he was not happy with the way the government responded to the CAG’s reports at that point in time.
“I was not happy with the way the government responded to the CAG reports. But then, responses are formulated by the ministry or department concerned. I think we should have made a distinction between policy and the implementation of policy. These policies are not even UPA inspired policies. These policies go back to a date before the UPA,” he said. Despite the economic gloom, Chidambaram said he was confident of the Congress leading a new coalition — UPA-3 — after the 2014 general elections. “Nobody votes on one issue.
Ultimately, people vote for a set of parties which will gravitate towards the Congress and there is a very good chance UPA-3 will be formed under the leadership of Congress. The pre-poll allies and the postpoll allies will make up UPA-3. UPA-3 need not mirror UPA-2. Like UPA-2 was a reconstituted UPA-1. Who will be in UPA-3 will become apparent as the months roll on,” he said. But when it comes to a swift economic recovery, Chidambaram said there are no quick fixes. “The world economy is challenged, so is India’s economy.
We will have to rebuild the economy brick by brick. We have got a pretty good idea of how to fix the fiscal deficit. We are trying to find ways to finance the current account deficit and the most obvious way to address issue of consumer price inflation is to improve the production of goods and services.
I think if we do the right things, say even by the text book, we will get the results over a period of time.” Chidambaram ruled out any discussion or even the possibility of approaching the International Monetary Fund to help bolster reserves through a lending window but he said other options such as a sovereign bond or a quasi-sovereign bond were on the table.