Lok Sabha Question No. 426 (STARRED), answered on 2025-04-01
Subject: Impact of Tariff Reductions
Ministry: COMMERCE AND INDUSTRY
Asked by: Shri K Sudhakaran, Dr. Kirsan Namdeo

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COMMERCE

## LOK SABHA STARRED QUESTION NO. 426 ANSWERED ON 01/04/2025

## IMPACT OF TARIFF REDUCTIONS

## *426. DR. KIRSAN NAMDEO SHRI K SUDHAKARAN

Will the Minister of COMMERCE AND INDUSTRY ( ) be pleased to state:

- (a) whether the Government is aware of the recent statement of NITI Aayog that tariff protections do not benefit India and reducing tariffs is necessary for economic growth, if so, the details thereof;
- (b) the details of tariff reductions implemented by the Government during the last three years, sector-wise;
- (c) the details of tariff increases implemented by the Government during the said period sector-wise; and;
- (d) the  details  of  impact  of  these  tariff  reductions  on  domestic  manufacturing  and international trade competitiveness?

## ANSWER

## ( )

## THE MINISTER IN THE MINISTRY OF COMMERCE AND INDUSTRY (SHRI PIYUSH GOYAL)

- (a) to (d) A statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY OF  PART  (a)  to  (d)  OF  LOK  SABHA STARRED QUESTION NO. 426 FOR ANSWER ON 1 ST  APRIL, 2025 REGARDING 'IMPACT OF TARIFF REDUCTIONS'

(a) The Government is aware of the recent statements made by NITI Aayog regarding tariffs  and  their  impact  on  India's  economic  growth.  The  statement  is  in  line  with  India's broader strategy for achieving economic growth and making India a more attractive player in the global economy.

India's tariff policy aims to regulate trade, protect domestic industries, and generate revenue through taxes on imported and exported goods. Recent reforms have focused on streamlining the tariff structure  and facilitating trade.  India is a member of the WTO and bound to its  maximum tariff that  can  be  applied  to  a  given  commodity  line.  The  applied tariffs are generally below the bound tariff for a given commodity line.

With the changing trade scenario, India is moving towards having Preferential/Free Trade Agreements  wherein  customs  tariffs  and  non-tariff  barriers  are  reduced  or  eliminated  on substantial trade between the PTA/FTA members. At present, India is a member of 13 FTAs and  9  PTAs  apart  from  the  negotiations  with  European  Union  (EU),  United  States  of America (USA), United Kingdom (UK), Oman, New Zealand and Peru.

While  lowering  tariffs,  especially  on  inputs  and  intermediate  goods,  helps  in  letting manufacturers become more competitive, a calibrated approach is taken while deciding on tariff measures by balancing the domestic producers' and consumers' interest.

(b) & (c) Rationalization of customs tariff structure was undertaken in Budget 2023-24 when 8 slabs of Basic Customs Duty rates were removed from the Customs Tariff Act. This was continued in Budget 2025-26 wherein 7 more Basic Customs Duty rates were removed thereby compressing the numbers of tariff  rates  from 21 to 8 (including  zero). The Basic Customs  Duty  rates  were  increased  on  a  few  items  to  either  incentivise  domestic manufacturing,  to  address  environmental  concerns  or  to  provide  temporary  protection  to domestic industry mainly in MSME sector from cheap imports from certain countries. The list of goods in which the customs tariff has been reduced and increased in the last 3 years can be accessed at http://www.cbic.gov.in/ .

(d) The government has initiated comprehensive tariff reforms  to  correct  inverted  duty structures,  i.e.,  situations  where  import  duties  on  raw  materials  exceed  those  on  finished products.  Such  reforms  are  designed  to  reduce  production  costs,  encourage  domestic manufacturing,  and  enhance  global  competitiveness.  However,  despite  reductions,  some domestic  industries  advocate  for  higher  tariffs  to  protect  against  foreign  competition.  This highlights the ongoing challenge of balancing tariff policies to support both domestic growth and international competitiveness.

India's recent tariff reductions have had significant  benefit for domestic manufacturing and international  trade  competitiveness  across  various  sectors  such  as electronics  and  Electric Vehicles (EVs)/Mobile Phones wherein in March 2025, India eliminated import duties on 35 items essential for EV battery production and 28 items for mobile phone manufacturing. This move aims to bolster local production and enhance export competitiveness in these sectors. Similarly, import duty reduction on critical minerals is likely to bring in investment in this sector.

In summary, India's tariff reductions aim to stimulate domestic manufacturing and improve international  trade  competitiveness.  While  these  measures  present  opportunities  for  growth and enhanced global integration, they also necessitate strategic adjustments within domestic industries to navigate increased competition and evolving market dynamics.

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