P. Chidambaram in New Delhi on Saturday. Picture by Prem Singh
New Delhi, Sept. 7: Finance minister P. Chidambaram today said “hard decisions” would have to be taken over the next few days and weeks to curb import of “inessential” items and trim wasteful public expenditure.
“We are going through a period of stress...we have to take some hard decisions. Many of these measures are being taken, and many measures will be announced in the next few days and weeks. Some measures to curb import of non-essential items will also be announced,” Chidambaram said.
“All these measures taken together will have a beneficial impact,” he said, winding up a debate on the appropriations bill in the Rajya Sabha.
On the issue of hiking oil prices in the backdrop of rising prices in the international market and rupee depreciation, Chidambaram said, “No decision has been taken and no decision will be taken in haste.” The government will weigh the advantages before announcing any step.
The government has already banned duty-free import of flat-screen television sets, adding to a package of measures designed to prop up the rupee. It may consider raising duties on more luxury goods, including imported automobiles, watches, perfumes and electronic goods such as laptops, refrigerators and music systems.
Sources say these have been recommended for duty hikes by an inter-ministry panel.
Officials said luxury items constitute 3-4 per cent of the total import basket and the duty hike is meant to be more token in nature.
However, higher taxes on electronics products that the government wants to bring in to force manufacturers of mobiles, television sets and refrigerators to move plants here instead of merely importing them or assembling them here could affect a wider array of imports.
Electronic goods are the third most imported item, valued at $32 billion in 2012-13.
The trade gap in the April-June 2013 period stood at over $50 billion, which would suggest that the annual trade gap for 2013-2014 may well cross $200 billion unless restrictions are put in place.
If the trade deficit can be lowered, the rupee is expected to strengthen. The rupee had hit an all-time low of 68.84 to the dollar last month. The rupee has fallen by over 33 per cent in the last two years.
Describing inflation as the worst form of taxation that hit the poorest the most, Chidambaram said, the government would be coming out with more measures to deal with the price situation.
Responding to the suggestion for cutting taxes on petroleum products, he said the matter could be considered provided states too agree to reduce the incidence of tax on oil goods.