Imports from India against dollar fall

KATHMANDU, JUN 22 -

There has been a massive decline in imports from India against the US dollar payment.

As of the first 10 months of this fiscal year, such imports came down by Rs 16 billion. The country imported goods worth Rs 31.41 billion from India by paying the dollar over the review period. The figure was at Rs 47.46 billion during the same period last fiscal year, according to the Nepal Rastra Bank (NRB).

The NRB has allowed import of 161 products—a majority of them industrial raw materials—from India against the US dollar payment.

Experts pointed out three factors responsible for the decrease in imports from India against the payment of the greenback—less use of industrial raw materials due the country’s bad industrial environment, the strengthening of the US dollar compared to the domestic currency and the scrapping of the Duty Refundable Procedures.

NRB Executive Director Min Bahadur Shrestha said low capacity utilisation of industries could be the reason behind the slump in the import of goods from India by paying US dollars. “A majority of goods to be imported against the dollar payment are raw materials,” he said.

According to an NRB study in eight major industrial cities, the average capacity utilisation of the industrial sector stood at 44.7 percent in the first half of this fiscal year. The study was carried out in Kathmandu, Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj and Dhangadhi.

The Economic Activities Study Report cited political transition, poor security, energy shortage, increased labour cost, lack of raw materials, strikes, and bad labour relations for industries’ low capacity utilisation. The average capacity utilisation of the industries was at 58 percent in the last fiscal year.

Former Commerce Secretary Purushottam Ojha attributed the slump in the imports against dollar payment to the strengthening of the US dollar and scrapping of the DRP provision since the last fiscal year. He said a stronger dollar means importers have to pay more domestic currency to purchase the dollar for import purpose. And, after the scrapping of the DRP provision, the incentives Nepali traders were getting for purchasing goods in US dollar terms do not exist anymore.

Before the scrapping of the DRP system, the Indian government would not charge excise duty on goods purchased by Nepali importers by paying US dollars. “Following scrapping of DRP, those importing goods by paying US dollar lost incentives and were discouraged to import goods in US dollar terms,” said Ojha.

Source: The Kathmandu Post