The government’s decision to enhance the import duty on 19 items to curb the ballooning current account deficit would have only a marginal impact on listed companies, according to analysts.
The increase will apply to aviation turbine fuel (ATF) and consumer appliances, such as television, refrigerator, air conditioner and speakers, footwear, suitcase, executive cases, and travel bags, among others.
“The move will have a negative impact on air-conditioner manufactures as compressor costs would go up by 10 per cent,” said Kunal Sheth, analyst, Prabhudas Lilladher. “Companies will not be in a position to pass on the extra cost to the customer as they have already increased prices twice this year due to the rupee depreciation.”
The current account deficit was at a fourquarter high of 2.4 per cent of gross domestic product in the April-June quarter on the back of rising crude oil prices However, the impact of these changes is unlikely to be dramatic on locally listed companies.
“As most of the products like air-conditioners, washing machines or refrigerators are manufactured or assembled in India, there will not be any major impact on the listed firms,” said G Chokkalingam, founder, Equinomics Research and Advisory.
“If you look at the domestic market for imported footwear, it is negligible as the bulk of the footwear market still resides in the retail price below Rs 500.”
The move should help narrow the trade deficit — or the gap between overseas spending and revenues — and help lift investor confidence.
“This will help the government earn more tax revenues,” said K N Dey, managing partner at United Financial Consultants, a Mumbai-based forex firm. “Over a period of time, it may reduce the trade deficit, a key concern for overseas investors. It will support the ‘Make-in-India’ movement.”
Source : PTi