Indian auto component industry is opposing any further reduction in custom duty, as it would add to the already robust import of components from China.
With duty in India ranging between 7.5% and 10%, one of the lowest as compared to the whole of Asean and China, the dragon land has emerged as a major threat to the industry that is already reeling under the impact of rising rupee.
In 2006-07, while imports from China grew by a robust 69% and stood at Rs 1,295 crore, the exports from India to the dragon land actually declined by 34.17% to Rs 104 crore as against Rs 158 crore during the same period last year.
Ever since the custom duty in India was reduced from 25% in 2002-03 to 7.5-10% in 2006-07, the import from China grew at a compound annual growth rate of 129% and the export to the latter grew by a mere 34%.
Apart from high duty, other benefits like subsidized electricity and lower interest rates have ensured that China continues to have an edge over India.