The government has started a comprehensive exercise to identify “non-essential imports” across sectors to curb their impact on trade balance and zero in on areas where domestic manufacturing needs to be pushed aggressively.

The commerce ministry has asked various ministries, including aviation, electronics, industry and steel, to identify such “non-essential imports” in sectors they oversee and submit the list of such products with it, a senior government official told FE.

The exercise is also crucial to identify sectors where more production-linked (PLI) schemes may have to be rolled out to boost local output, he added.

“Identification of ‘non-essential imports’ doesn’t mean the government will resort to duty hikes on all such products. The idea is to see how local production of these items may be bolstered so that import incidence automatically comes down,” said the official.

Once the ministries submit their lists of products, the commerce ministry is expected to chalk out the next steps.

For instance, the civil aviation ministry has reportedly sought curbing the import of private jets and helicopters. Earlier, sources had said imports of gold and diamond jewellery, certain consumer electronics products and plastics might be targeted through duty hikes.

The exercise to identify such imports is also part of the government’s broader efforts to contain the elevated current account deficit (CAD) if the rupee weakens against the greenback further. The move also comes after the pandemic exposed India’s traditional but uneasy reliance on supply chains from geographies that were not reliable and transparent. This prompted the government to scour for solutions to reduce reliance on such suppliers.

Elevated CAD has proved to be a double whammy for the rupee at a time when the US Federal Reserve has resorted to aggressive policy tightening to control inflation.

The rupee has depreciated 10.5% so far in 2022, although it has still performed better than many other currencies.

More importantly, merchandise trade deficit hit a record $173 billion until October this fiscal, and is expected to go well past $200 billion in FY23. Moreover, while goods imports are still growing, albeit at a slower pace, export prospects have been battered by an economic slowdown in key markets, such as the US, EU and China.

Consequently, analysts have forecast the CAD to exacerbate to 3-3.5% of GDP in FY23, against 1.2% in the last fiscal. The recent moderation of select commodity prices globally is, however, expected to ease pressure on trade balance for a net importer like India.

Official data showed electronics imports jumped 35.3% in FY22 to a record $71.2 billion, having made up almost 17% of the overall merchandise imports. In the first seven months of this fiscal, such imports jumped 17% even on the elevated base to hit $43.9 billion. Within this, consumer electronics imports climbed close to 44% on year to almost $4.7 billion until October this fiscal.

Similarly, imports of jewellery made of precious metals like gold surged 92?tween April and October from a year before to $637 million. Imports of plastic sheets, film, etc. rose 27% until October to $1.8 billion, while those of other plastic products jumped 38% to $554 million.