Modi’s Atma Nirbhar Bharat push may make air conditioners costlier; experts warn costs may rise

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Published: June 5, 2020 11:07 AM

The Narendra Modi government alleviating the pitch for ‘Make in India’ products may end up increasing the prices of products such as ACs even if they get domestically made.

The government has been vocalising the need for making local and cutting exports.

The Narendra Modi government alleviating the pitch for ‘Make in India’ products may end up increasing the prices of products such as ACs even if they get domestically made. According to a government proposal, basic Customs duty on nine key AC components may get hiked in the range of 50-165% as the government looks to push domestic manufacturing, P Vaidyanathan Iyer wrote in The Indian Express. Under the proposed route, duty structure will get inverted with finished products having lesser duty than constituent products, which may cause AC prices to go upwards.

The government has been vocalising the need for making local and cutting exports. Addressing CII’s 125th anniversary session, PM Modi said that there are ten sectors where India can drastically cut exports and ACs are one of these areas. However, industry veterans said that while the same may increase domestic manufacturing, it will raise the costs of these products.

“The new proposal is a throwback to the 1970s… the dangerous protectionist times,” The Indian Express cited a well-regarded CEO of an Indian manufacturing company as saying. The person added that it will not promote local industry but rather uncompetitiveness. Risks of product price increases also loom large. At the CII session, PM Modi emphasized on the need to produce locally. “We need to rapidly reduce this (imports),” he said at the virtual event. The country currently imports over 30% of its domestic demand for ACs.

Not all sectors can do with self-reliance

The coronavirus pandemic has brought focus on domestic manufacturing again. With the international borders getting sealed due to the coronavirus outbreak, supplies of key items dried up forcing companies to start manufacturing in India. However, not all items can be produced locally. “Self-reliance or atma nirbharta for medical supplies is good, especially during times of a Covid-like pandemic when global supply chains are completely disrupted. But this should not be confused with Make in India for ACs or refrigerators or furniture,” an industrialist said, the newspaper reported.

Meanwhile, the government has already started work to make India self-reliant in areas such as gems and jewellery, footwear, and textiles & garments, among others. The relevant ministries are now looking to bring more investments so that the country can become a manufacturing hub. India is also working on making food clusters such as for items like saffron, chillies, turmeric etc to make them available globally as PM Modi now focuses on exporting more, importing less.

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