August 9, 2017
In the wake of India’s GST regime, Nepali industries should focus on increasing competitiveness to tackle cheaper imports from India, says the Nepali industry community.
“Domestic industries should ramp up their competitiveness to tackle the cheaper imports from India,” said Shekhar Golchha, Senior Vice-President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
In an interaction programme titled ‘Goods and Services Tax in India: Implications for Nepal’, organized by South Asia Watch on Trade, Economics and Environment (SAWTEE), Shekhar Golchha noted that GST may also hit India’s Foreign Direct Investment (FDI) in Nepal as the GST system has lowered cost of doing business in India.
According to Golchha, Nepal’s plan to bring in Indian investment into the Nepali production sector would also be affected if the Nepali industry fails to maintain pace with India in minimizing cost of production.
Meanwhile, Economist Keshab Bhattarai from the University of Hull, London noted that Nepal need not worry about GST because the tax is exempted on export from India. However, he added that “cheaper import from the southern neighbor may ruin the country’s production base if we are unable to improve our competitiveness”.
Posh Raj Pandey, Executive Chairman of SAWTEE, said that GST has boosted Nepali exports to India. SAWTEE’s study on top 30 Nepali export items concluded that export tariff for the top 28 items will rise. It is noteworthy here that GST is applicable on export from Nepal.
Pandey also noted a possible rise in unauthorized trade between the two countries. “This may encourage smuggling of goods from Nepal to India,” he added.