Customs Duty Reforms
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Source-This post on Customs Duty Reforms has been created based on the article “Boosting Trade: Lower tariffs will improve export competitiveness” published in “Business Standard” on 31 July 2024.

UPSC SyllabusGS Paper-3- Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context– In 2023, India started 45 anti-dumping investigations, imposed duties in 14 cases, and had 133 measures impacting 418 products. The government is now reducing Customs duty on about 50 products to boost competitiveness and will review the duty structure over the next six months.

Customs duty has been cut or eliminated for items like mobile phones, leather, ferro-nickel, blister copper, solar cell equipment, and petroleum-exploration tools. Also, 25 critical minerals are now exempt from Customs duty.

What is the current state of India’s export and manufacturing in electronic goods?

India’s mobile phone exports rose by over 40% to $15.6 billion in 2023-24. However, the country still lags in manufacturing advanced components like lithium-ion cells and semiconductor chips, with most value added in China, South Korea, Japan, and Vietnam.

Read More- WTO Reforms and India

How does this shift compare to India’s previous trade policy approach?

This shift contrasts with India’s earlier trade policy, which focused on protectionism and import substitution. Starting with the 2018 Union Budget, import tariffs were raised on over 40 items to protect domestic industries and create jobs. As a result, tariffs over 15% increased from 11.9% to 25.4% between 2010-11 and 2020-21

What is the significance of tariff reduction?

1) India’s average tariff decreased from 18.1% in 2022 to 17% in 2023(As per WTO Data). The review of Customs rates will further lower tariffs, align them with regional standards, and enhance competitiveness.

2) Customs duty reduction will increase domestic production in renewable energy, defense, and e-mobility.

Way ahead– Indian businesses should get ready for more global competition as lower tariffs are likely to boost competitiveness.

Question for practice

How does this shift differ from India’s previous trade policy approach? What is the importance of reducing tariffs?

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