Revised Tariff Structure to Improve India’s Global Trade Image

  • February 3, 2025
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Revised Tariff Structure to Improve India’s Global Trade Image

Sub : Eco

Sec : External sector

Why in News?

  • The Union Budget 2024-25, announced on February 1, 2025, has introduced a revised tariff structure aimed at rationalizing import duties and correcting India’s global trade optics.

Context:

  • The Indian government has reduced peak customs duty rates, eliminating high tariff slabs of 150%, 125%, and 100%.
  • The move is expected to address global criticism, particularly from countries like the U.S., where President Trump labeled India as a “tariff abuser”.
  • The changes streamline the duty structure from 15 slabs to 8 slabs, signalling a lower tariff regime.

Key Highlights of the Revised Tariff Structure

Reduction in Peak Tariff Rates

  • The highest custom duty rate has now been brought down to 70%, eliminating extreme slabs of 150%, 125%, and 100%.
  • The average tariff rate has been lowered to 10.6%.

Tariffs on U.S. Exports to India

  • Top 30 U.S. exports to India (including crude petroleum, coking coal, airplanes, and liquefied natural gas) face minimal tariffs in the range of 0% to 7.5%.
  • The move is designed to improve trade relations with the U.S. and counter criticism of India’s high tariff barriers.

Trade Optics and Global Perception

  • The government aims to counter the perception that India is a high-tariff country.
  • Indian officials have prepared a fact sheet on India’s tariffs on key U.S. products, which may be shared through diplomatic channels.

Justification by Government

Correcting “Bad Optics”

  • The government believes the old high tariff rates created a negative perception globally and rationalization will send a positive signal to global markets.

Encouraging Trade & Investment

  • Lower tariffs are expected to boost foreign investment and enhance trade partnerships and the tariff cuts are part of an “autonomous review” of India’s customs duty structure.

Alignment with Global Trade Practices

  • The rationalization aligns India with global tariff standards, making the country a more attractive trade destination.
economy Revised Tariff Structure to Improve India’s Global Trade Image