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DMPQ: What is Inverted duty structure ? How it has impacted Indian manufacturing over the years.

RAS/RTS Prelims and Mains Exam Preparation

Inverted duty structure is a condition in which final good is taxed lower on its import as compared to the intermediate good used in the making of finished good.  The economic survey has pointed out that Inverted dusty structure has affected our industries a lot.

 

 

Major effect of inverted duty structure:

  • Affect domestic manufacturing industries. They will be at disadvantage.
  • Lack of creation of jobs as it does not support demands for domestic goods.
  • Higher Import bill will ultimately affect the Current account deficit.
  • Will affect the Make in India initiative.
  • The pattern of jobless growth will continue. The benefits of growth will not percolate down and hence it will affect the inclusivity.
  • Flooding on Indian markets with foreign goods eg. Chinese goods

 

 

Hence there is a need to correct this inverted duty structure trend and Government has recognised this anomaly and has reduced the rates.

 

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