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Donald Trump's reciprocal tax may not hit India's bikes, steel industry

Abhishek Waghmare and Megha Manchanda/New Delhi 16 Feb 18 | 05:46 AM

bikes, auto expo

India’s motorcycle manufacturers would not take a major hit on account of US President Donald Trump’s call on a “reciprocal tax" for “thousands and thousands" of motorcycles exported from India to the US, the domestic data shows. 

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In 2016-17, India exported 2,440 motorcycles, worth $6 million, to the US. And till the April-November period in 2017-18, it was at 4,480, worth $11.5 million. This is just 0.4 per cent of domestic motorcycle exports. Every year, India exports more than two million motorcycles. In the initial months of 2017-18, India exported motorcycles worth $1.3 billion.

Trump’s threat came a month after the US announced an anti-dumping duty on fine denier polyester staple fibre, imported from China and India. Reliance Industries is one of the main polyester exporters in the country.

During a discussion with Congress members on the steel industry on Tuesday, Trump said the recent decision by the Indian government to reduce the tariff on imported bikes from 75 to 50 per cent was not enough. He said the duty should be reciprocal because the US imposed “zero tax" on the import of motorcycles. India started importing Harley Davidson motorcycles from the US in 2007, in return for mangoes being sold there. 

The Indian steel industry, however, is unperturbed by Trump’s pitch for protectionism, since the value of iron and steel exports to the US is minuscule. In the first eight months of 2017-18, India exported iron and steel, worth $230 million, to the US, as against the $330 million in 2016-17. This is a fraction of the overall exports of $7 billion in 2017-18 to date.

“It (stainless steel) is not a big-ticket item, since the quantity is not very high. There won’t be any impact," said K K Pahuja, president of the Indian Stainless Steel Development Association.

India exported more than two million two-wheelers, which were worth $1.6 billion, in 2016-17. Half of the earnings came from Asian countries: Sri Lanka, Bangladesh, Nepal and the Philippines. Colombia, a South American country, accounted for more than 10 per cent of domestic bike exports. 

In 2016-17, India imported 1,820 motorcycles from the US and in 2017-18 (to date), it was at 800, according to the commerce ministry data. 

Motorbikes constitute just 0.04 per cent of India’s exports to the world’s largest economy. India’s exports to the US were worth $31 billion in 2017-18 (April-November) and $42 billion in 2016-17. The US has a trade deficit of $20 billion with India, with imports to India at $22 billion in the last financial year.  

The Central Board of Excise and Customs (CBEC) had reduced the import duty on fully-assembled motorcycles with an engine capacity above 800cc from 75 per cent to 50 per cent. Trump said this was “not enough". The import duty on lighter two-wheelers (less than 800cc) was brought down from 60 per cent to 50 per cent, while that on un-assembled ones was increased from 10 per cent to 15 per cent. 

India exports bars and rods, wires, angles, shapes and sections of stainless steel to the US. Apart from these, iron and non-alloy steel products form a quarter of exports, while raw iron products form another quarter. 

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