NEW DELHI — A hike in customs duties on 19 items, including imported footwear and jewelry, has global brands in India concerned about the changing economic climate in India. The hike was implemented with immediate effect after a government announcement went into effect last week.
“These changes aim at narrowing the current account deficit [CAD],” the finance ministry said. The government announcement is part of a quick-save for a situation in which the depreciating Indian rupee is causing concern. The rupee is down more than 13 percent since January and has fallen to a record low, to 72.54 rupees per U.S. dollar.
The additional 5 percent brings import duties for footwear up from 20 percent to 25 percent.
India is the second-largest producer of footwear globally, making up nearly 13 percent of the global production. China is the largest producer of footwear.
In India, the premium and luxury segment, which covers everything from athletic footwear to high-end names, is largely made up of global brands. These include labels such as Adidas, Reebok, Nike, Puma, Skechers, Crocs, Aldo, Charles & Keith, Pavers England, Hush Puppies, Clarks, Steve Madden, Tod’s, Bally, Ralph Lauren, Ermenegildo Zegna, Burberry, Chanel, Gucci, Versace, Hugo Boss, Kenneth Cole, Jimmy Choo, among others.
The hike in import duties is expected to boost Indian footwear manufacturers such as Bata India Ltd., Liberty Shoes and others, and it is expected to force athletic brands such as Adidas and Puma, which have been quickly increasing their number of stores in India, to re-strategize and focus on balancing the best global offering with competitive prices.
Jewelry imports will be more expensive as well, with duties rising to 20 percent from 15 percent. Specifically, “articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal” and “articles of goldsmith or silversmith wares and parts thereof of precious metal or of metal clad with precious metal,” the government said.
Meanwhile, economists predict that the rupee, which has been one of the worst performing currencies in Asia in this year, will remain weak for the foreseeable future. This comes against a government prediction of overall growth of 7.5 percent for the economy. Moody’s Investors Service has also predicted growth of around 7.5 percent in 2018 and 2019.
The Indian economy grew by 7.7 percent in the first quarter of 2018. “High-frequency indicators suggest a similar out-turn for the second quarter. Growth is supported by strong urban and rural demand and improved industrial activity,” according to Moodys.