Tariffs on imported goods! A completely ‘fair trade’ practice by India

February 23, 2018by Faber Infinite0

Import of automobiles such as bikes and cars have been on the rise lately with the increasing zeal of bike enthusiasts to own superbikes from all around the country. This brings a fair amount of trade to both the exporter and importer country, which in this case is India.

In a recent lawmaking session at the White House, US President Donald Trump accused India of using ‘unfair trade’ practices by levying heavy taxes on the import of United States’ motorcycles brand (Harley Davidson and Triumph) in the country. He has been talking about it since he got seated on the president’s chair back in February 2017, but did not name India and was less coy then.

“We pay a tremendous tax to get into their countries — motorcycles, Harley-Davidson, it goes into a certain country. I won’t mention the fact that it happens to be India, in this case,” Trump said in the same session.

He went on claiming that Indian brands sell thousands of bikes every year in the States without an additional burden of tariffs and duties implied on them and threatened to impose ‘reciprocal taxes’ on India motorbikes and products if the Indian government does not remove the import duties on America made bikes.

On the other hand, if looked at the Indian perceptive, the accusation of ‘unfair trade’ practices is completely baseless as there is not any law book which suggests that imposing taxes on imported goods is unfair towards the exporting country. The claim by Donald Trump of Indian companies selling ‘thousands of motorcycles’ in US itself seems a bit contradicting to what the numbers suggest. People who have closely monitored Indo-US relationships and trade practices have already many times made it clear that United States is not one big promoter of importing Indian motorcycles in the state. Furthermore, high-end brands like Harley Davidson sell more than 3,700 units every year in the India which actually is a very respectable number is considering the leisure of the brand and its limited portfolio of selling luxury cruiser bikes.

India indeed had a 100% tariff on motorcycles encompassing an engine more than of 800cc but has made a subsequent decrease in the tariff rates to 75% first and to 50% in the third quarter last year. Moreover, it is India’s right to imply taxes on imported goods in the country. Every country in this modern world levies taxes on imported goods to gain revenue; even the United States of America itself collects import duties on goods that are imported in America.

This new reform of slashing down the tax rates is obviously going to attract more amounts of goods, especially bikes being imported in India. It will also pave the way for foreign brands who considered India as a potential market for them. It will also help the Indian government garner revenues that will be ultimately used in optimizing the Indian market which will come back as an opportunity to these brands again.

India is a developing country and is promoting investments in the Indian market to manufacture the goods that will cater to the demands of the customers under the umbrella campaign “Make in India”. Many foreign brands like KTM and Benelli have started joint ventures in India and have started manufacturing in India itself to serve the local segment. Other brands can also take advantage of this campaign and start their own manufacturing units in India. It will not only provide them a better understanding of the market because of its proximity but will also help the companies in strengthening their foothold in the Indian subcontinent.

Photo Credit: Reuters
Written & Compiled by Faber Kishlay & Faber Mayuri

by Faber Infinite

Faber Infinite is an International Business Management Consulting Organization offering consulting solutions and services for Increase Profitability in Business.

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