India’s import tariffs- Express View on India’s tariff regime: Costs of a barrier

Source: The post on India’s import tariffs has been created, based on the article “Express View on India’s tariff regime: Costs of a barrier” published in “Indian express” on 28th February 2024.

UPSC Syllabus Topic: GS Paper 3 – Indian Economy- Mobilisation of resources

News: This article discusses India’s increasing import tariffs since 2014, which are now among the highest globally. High tariffs harm manufacturing and exports, and there’s concern about the impact on sectors like electronics and pharmaceuticals.

What is the trend in India’s import tariffs?

Since 2014, India has increased tariffs about 3,200 times.

The average tariff rose from 13% in 2014-15 to around 18%.

India’s tariffs are higher than those of China (7.5%), Vietnam (9.6%), and Bangladesh (14.1%).

These high tariffs are in contrast to earlier trends of reducing tariffs from 125% in 1990-91 to 13% in 2014-15.

What are the impacts of high import tariffs?

1. High tariffs disadvantage manufacturers by increasing production costs. It negatively affects India’s export competitiveness compared to countries with lower tariffs.
2. Consumers are hurt due to higher prices and limited product choices.
3. Sectors like electronics and pharmaceuticals face challenges due to dependency on imported components, particularly from China. For instance, the electronics sector struggles with higher costs for parts like circuit boards and chargers.
4. High tariffs also affect sectors attempting to diversify away from Chinese supply chains. For example, countries like Vietnam, Thailand, and Mexico, which have lower tariffs than India, become more attractive to manufacturers.

What is the government’s recent approach?

1. The government has started rethinking its high tariff policy. It recently reduced the import duty on mobile phone components from 15% to 10%.
2. India is pursuing trade agreements to enhance economic ties and trade. Agreements have been signed with the UAE and Australia, and negotiations are ongoing with the UK.
3. These efforts reflect a more nuanced approach to balancing protectionism with global trade demands.

Way forward

Moving forward, India should continue reducing high tariffs to enhance competitiveness and attract foreign investment. Pursuing more trade agreements, like those with the UAE and Australia, will further open markets. Balancing protectionism with global trade demands is key for India’s economic growth and manufacturing sector development.

Question for practice:

Evaluate the effects of India’s high import tariffs on its manufacturing sector and global trade relations considering recent government initiatives and trade agreements.