Source: The post India must rationalise tariffs to boost competitiveness has been created, based on the article “Resist pressure, lower tariffs” published in “Indian Express” on 15 September 2025. India must rationalise tariffs to boost competitiveness.
UPSC Syllabus Topic: GS Paper 3 – Economy and GS paper 2– Effect of policies and politics of developed and developing countries on India’s interests
Context: US leaders label India the “tariff king” and “tariff maharaja”. The article tests this claim by comparing G20 tariffs, which cover 85% of global GDP, 75% of trade, and two-thirds of population. It examines simple and trade-weighted rates for all goods, agriculture, and non-agriculture, and proposes reforms.
For detailed information on India’s Trade Resilience Amid US Tariff Pressures read this article here
What do G20 tariff numbers show?
- Overall tariffs: Turkey’s simple average tariff is 17.3 per cent and India’s is 16.2 per cent. On a trade-weighted basis India leads at 12 per cent. The US is at 3.3 per cent simple average and 2.2 per cent trade-weighted.
- Agriculture tariffs: India has the highest trade-weighted agricultural tariff at 64.3 per cent. On simple average, South Korea tops at 57 per cent and India is at 36.7 per cent. Trade-weighted rates are 4.2 per cent for the US, 8.7 per cent for the EU, and 13.8 per cent for China.
- Non-agriculture tariffs: In non-agriculture goods, Argentina leads on a trade-weighted basis at 11.6 per cent. India follows at 9.2 per cent, indicating high protection outside agriculture as well.
Why does India protect agriculture?
- Livelihood structure: India has 46 per cent of its labour force in agriculture, must feed 1.45 billion people, and has average holdings near 1 hectare. By contrast, agriculture employs 2 per cent in the US, 4 per cent in the EU, and 22 per cent in China.
- Trade reality: China is the largest net importer of agricultural products, over $100 billion in 2024. The US is the biggest exporter at $182.8 billion, yet also a net importer at $59 billion. Imports can complement growth when countries focus on comparative advantage.
- Negotiation backdrop: High agricultural tariffs are contentious in talks, yet reduction is possible because the structure is inconsistent and often irrational.
Where are agri-tariffs irrational?
- Under-protected essentials: Edible oils, a third of India’s agricultural imports, face 10 per cent duty. Cotton is zero, yellow peas negligible, and almonds below 15 per cent.
- Over-protected items: Walnuts and chicken legs face duties above 100 per cent. Apples carry 50 per cent, blueberries 30 per cent, skimmed milk powder 60 per cent, and food preparations such as soft drink concentrates, custard powder, and lactose syrups 150 per cent.
- Contradictory cases: India is the world’s largest rice exporter, yet rice carries a 70 per cent import duty. Such dispersion cannot be justified simply as farmer protection, since farmers across commodities deserve consistent treatment.
What reform path does the article propose?
- Rational tariff bands: Cap all duties at 50 per cent. Keep raw materials at 0–10 per cent, non-sensitive goods at 10–20 per cent, sensitive goods at 20–35 per cent, and luxury items at 35–50 per cent. Use tariff rate quotas for sensitive agricultural commodities.
- Raise productivity: Double agricultural R&D to at least 1 per cent of agri-GDP and scale precision agriculture so farmers produce more from less.
- Reform subsidies: Rationalise fertiliser subsidy by giving direct benefit transfers to farmers and freeing fertiliser prices.
- Value chains and strategy: Strengthen farm-to-fork value chains. Treat the US’s 50 per cent tariff on Indian goods as a wake-up call. Apply GST-like rates and, over time, lower tariffs well below 10 per cent. Shift from protecting inefficiency to building competitiveness.
Question for practice:
Examine whether India deserves the “tariff king” label based on G20 tariff data.
