India recently decided to remove retaliatory duty on eight US products including apples, walnuts etc. On the one hand, India is making the trade bond stronger with the US and on the other hand, it is discouraging the domestic fruit growers by removing the additional tax (retaliatory duty) out of 70% which was the 20% that was imposed on June 15, 2019, because of the trade dispute between India and the US. But if we look at the current scenario, the dispute has been settled.
Since G20 has expanded its agenda to inter-alia including trade etc, both countries are the prime members of the G20 intergovernmental forum. The rationale behind the withdrawal of this additional 20% duty is that the requirement of the total quantity demand of apples is 2.6 million metric tonnes in the domestic country is not being fulfilled by the domestic production which is 2.4 million metric tons (2022). The second reason to remove this duty is to make the trade bond even stronger. The northern state of Jammu and Kashmir was responsible for the majority of the county’s apple production during that fiscal year (2022).
If we look at the other side of this whole thing is that the domestic growers are being discouraged from growing these products or we can say that the induced investment would surely not take place on the grower’s side because most of the people would choose to close this business because their total expenditure is greater than their total revenue.
How to tackle this problem?
If the government supports the domestic producers whether, in terms of input subsidy or minimum support price for their products, they will be induced to invest more in that product and in the end output for sure is going to increase within a period of time and eventually, the country is going to be in a situation of self-sufficiency.
On the other hand, if the country removes the import duty and at the same time domestic growers close their business of that particular product, this is for sure that the country is going to be in a situation where it will be more dependent on the foreign country. It will import more and more in the coming period, and the trade will be in deficit which leads to a decline in demand for locally made goods. This further leads to the closing of factories and the associated job losses. Moreover, this trade deficit drives the currency exchange rate down.
Now if we take a brief look at the low exchange rate means that a weaker currency makes imports more expensive. Or a lower-valued currency will make imports more expensive and exports cheaper in foreign markets.
Summing up
The country should support its domestic growers so that they would produce more and more which will lead to self-sufficiency instead of importing more and more which will lead to the trade deficit.
The writer is pursuing Masters in Economics at the Aligarh Muslim University (AMU). He can be reached at [email protected]

Ebrahim Nazir