India is preparing a list of items imported from China, for which it could impose barriers in the form of higher customs tariffs, stringent standards and licence requirements as retaliation against the neighbouring country’s strong-arm tactics at the border area in Galwan Valley.

Active pharmaceutical ingredients (APIs), industrial chemicals, telecom equipment, leather goods, steel items, gems and jewellery, furniture, hardware and textiles are some of the items suggested to the Commerce and Industry Ministry for inclusion in the list by various stakeholders, an official aware of the development told BusinessLine.

“The Commerce Ministry is taking inputs from various industry groups, export promotion councils and export bodies on the items that could be targeted, so that the measures affect mostly Chinese goods,” the official said.

The easiest way to impose barriers is to increase customs duties, and despite India raising tariffs on a large number of items over the last couple of years, there is scope for more. “There are a number of items that we import from China, where either we have not reached the bound rates committed to at the World Trade Organisation or where no commitments have been taken. For instance, in furniture, most of the items are unbound and have no ceilings,” another official following the development said.

The Finance Ministry had raised import duties on 111 products in the Union Budget announced earlier this year, out of a list of 300 items prepared by the Commerce Ministry.

WTO rules

One problem with raising import tariffs is that it would affect all trading partners and not specifically China, as the WTO stipulates similar tariffs for all member countries. The government is trying to find a way around this. “The items being shortlisted are mostly those where China has the largest share of our market,” the second official said.

US President Donald Trump imposed higher tariffs on Chinese products in 2018 stating that it was an action against the country’s unfair trade practices reflected in the high trade deficit suffered by the US and inadequate intellectual property protection in the country, the official pointed out. However, the WTO doesn’t recognise trade deficit as an unfair trade practice.

“The government is looking at examples such as the US, where import duties have been raised against one country. But acceptability at the WTO also has to be kept in mind,” the official said.

In the previous fiscal, India’s trade deficit with China declined slightly to $57.4 billion from $59.3 billion in the previous year, but there were speculations that some imports could have been diverted through Hong Kong.