What happened to the imported second-hand car you planned on buying? It can now be imported sans licence but with a whopping import duty of 105 per cent plus special customs and countervailing duties, all adding up to 180 per cent of levies. To add to your woes, there are some really tough import conditions attached too—single port of entry (Mumbai), right-hand drive, a five-year minimum life. The upshot: a three-year-old Toyota Corolla can set you back by Rs 13 lakh. By the way, the new model costs Rs 11 lakh. The message: keep away from imported cars. There is some hope: the tariffs would have to be cut to at least present asean levels of 10-12 per cent in four years and to 5-6 per cent by 2009-10.
Don't expect a flood of cheaper imported colour TV (ctv) sets either. "Indian ctv prices are quite low and globally competitive," insists Ajay Bajpai, senior vice-president and head of the entertainment electronics business group of bpl. "It'll be difficult for importers to compete with the local players after paying almost 65 per cent central duty. Add to this the various margins and sales taxes." Says Ajay Kapila, VP (sales and marketing), LG Electronics: "Brands can't be built solely on an import model in consumer durables. There's also the question of after-sales service."
The foreign booze blues continues. All the top foreign brands will invite a basic customs duty of 210 per cent. Then there's a three-tier graded additional customs duty ranging from 285 per cent to 360 per cent. On top of that, sales tax. The result: a Johnny Walker Black Label one-litre bottle, that smuggler's favourite, could set you back by about Rs 7,500, five times the grey market rate. In the near future, duty will be cut to 150 per cent but that's little cheer for Scotch lovers. Some cheap rums, wines and vodkas from East Europe may affect the Bacardis and Smirnoffs. "Otherwise, import of foreign liquor is simply unviable," says a Mumbai-based liquor industry manager. Smugglers are surely rejoicing. And local industry is happy. "It (high duties) is a pragmatic move which will give breathing space to locals," says Vijay Rekhi, managing director, McDowell.
Retailers are a confused lot. Right now, they say, most imported stuff is smuggled in and obviously comes cheap, with no duties. Most fmcg majors also underinvoice their products.But with the lifting of QRs, most players will have to make valid invoices which will possibly lead to an increase in prices.
The logic behind the high duties is to protect local industry and generate revenue for the government.But India's infamous revenue departments are thoroughly corrupt and avaricious—and such a high tariff regime, many suspect, is an "open invitation", in the words of a cii official, to smuggling and underinvoicing. Smuggling of cigarettes alone, according to an Indian Chamber of Commerce estimate, costs the Indian exchequer Rs 1,000 crore a year. Apart from ludicrously low-priced and downmarket Chinese brands, the QRs withdrawal will hardly affect high-end consumers. Reason: the grey market for imported brands continues to grow at 20 per cent annually. Says Bhaumik, "Soon, the consumer will be able to choose between legal but expensive imports and cheap but smuggled foreign goods." Some retailers like Jimmy Wadhwan of a south Delhi supermarket stocking imported goods differ: "Even with the duties, prices of legal imports won't be that high. The grey market is bound to suffer. Retailers will opt for hassle-free dealings, good deals and incentives."
That may be too optimistic but there's a sunny side to a QR-free import regime apart from the goodies 'rush'. It forces India's producers to improve quality, become more competitive and, to a certain extent, keep domestic prices under check. (The World Economic Forum ranks India 53rd out of 59 countries analysed for competitiveness.) High tariffs, for example, will possibly not deter imports in the processed food sector. Better-quality imported items in this sector will have a positive effect on Indian manufacturers. Take Kellogg's, which grew the segment for breakfast cereals in India. But local player Mohun benefited by upgrading itself and offering a lower price.
There will be no price wars in the offing and the Indian consumer's life will not change radically. "Even though retailers will have a wider variety of goods to sell, they aren't going to enjoy margins because of high prices. So it's not time yet to uncork shampoo bottles," says a Delhi-based economist wryly. Adds Debroy: "It's not only the urban consumers with deep pockets who'll gain. The urban-rural divide is getting blurred in many cases. But this is more of a metro phenomenon."
Clearly, the best thing about this influx is the consumer's freedom of choice. Indians no longer have what V.S. Naipaul once famously called an irrational "craze for phoren". As they globalise, their aspirations rise. Like Delhi homemaker Sharmistha Sengupta, who welcomes foreign imports as she loves trying out exotic recipes. "Our tastebuds are changing, experimenting with new recipes from around the world. Foreign ingredients are a boon." Or take Chennai travel executive T. Ramesh Babu, 33, who has two Swatch watches and indulges himself with foreign shampoo, cologne, talc, gel and goes to a mall to relish hot chocolate and cookies from Oz regularly. "I deserve the best money can buy," he says. Why not?
with gauri bhatia and arijit barman and Soma Wadhwa
