India has decided to help out the world’s consumers by expanding its list of exports that receive subsidies. Think about it. Whenever a country subsidizes exports, their politicians have made a decision to transfer some of their own tax revenue to buyers in a country in which nobody votes for them. Doesn’t make a whole lot of sense, put that way. Of course, that isn’t how the process is described. It is usually something like we need to boost exports in order to create jobs – so I’ll line the pockets of friends who make campaign contributions.
I’m not picking on India. They are just the latest country to decide to transfer resources to other, perhaps richer countries. India has a program dubbed the Focus Product Scheme that allows a small tax benefit to go to Indian exporters of a growing list of products. As the list grows, I suppose the scheme becomes less focused – but that is New Delhi’s problem. The list grew by 158 supposedly “high tech” products a few days back, and the new payoff begins on August 15.
The mechanism behind the Focus Product Scheme is creative. For listed products, the Indian exporter receives a duty credit usually equal to 2% of the FOB value of the exports. In other words, the subsidy is delayed. It isn’t paid on the date of export, but whenever the exporter imports something for which it owes customs duties. So what happens if a product is entirely home-grown in India? The exporter that receives the duty credit is allowed to sell or otherwise transfer the credit to somebody else. Clever.
The products covered by the scheme are deemed to be of “high export intensity or employment potential“. In the past that has included engineering products, products made by handlooms, plastics, stationery, fireworks, leather products, coir products, silk, vegetable, jute and sisal products, electronics, glass and “green” products. Mixed bag.
The “high tech” products just added to the list, and thus eligible for the 2% customs duty credit, include such things as aircraft engines and parts, helicopters, small aircraft and parts, aircraft instrumentation, contact lenses, binoculars, cameras, microscopes and telescopes, lasers, surveying instruments, hearing aids, pacemakers, medical imaging equipment, oscilloscopes and similar instruments, thermostats, shotguns and rifles, ammunition including bombs and grenades, video recording equipment, radars, blood fractions, a whole bunch of vaccines and antibodies, even more pharmaceuticals, and bags made from jute. The latter includes jute soil savers, too, so rush down to your garden supply store. Oh, and copper sulphate is being dropped from the list, so you may have to pay 2% more for it now.
Just remember, unlike the typical political reaction that another country’s subsidies must be hurting us, a new foreign subsidy is an opportunity for our consumers to celebrate. Think I’ll go buy some Indian soil savers, maybe contact lenses and – what the heck – maybe a shotgun. Indian peasants will pay for the lower prices. Thank you.