Home/ News / India/  WTO urges India to reduce tariffs

India’s average tariff increased to 14.3% in FY21 from 13% in FY15 with the country’s policymakers frequently using trade policy measures to encourage domestic production and curb inflation, the World Trade Organization (WTO) said in its latest Trade Policy Review for Asia’s third-largest economy.

“While the overall goal remains to increase exports, since policymaking in India is focused on domestic issues, trade policy is frequently used to encourage domestic production and meet domestic inflation and supply objectives. Thus, changes are made as required to import and export restrictions and the tariff to ensure stable domestic supplies of key products," the WTO secretariat said in its report, holding that frequent changes in import and export policy create uncertainty for economic actors.

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“International trade receives inadequate attention both in the government and outside in India, with the inward focus being visible across most institutions both in the public and private sectors, " said a high-level advisory group of WTO in its report released in September 2019.

The report called for a reduction of the tariff for making it simple and more predictable. With regard to agriculture, it recommends that “there must not be a ‘stop and start’ policy on exports and imports of agricultural products because that prevents farmers from taking objective decisions on sowing different crops".

India’s average agricultural tariff rose from 36.4% in FY15 to 36.5% in FY21, while average non-agricultural tariff rose from 9.5% to 11.1% during the same period. The most important increase in non-agricultural goods included clothing, (from 10% to 19.6%), oilseeds, fats, oil and their products (from 26.7% to 35.1%), and sugar and confectionary (from 35.4% to 47%). In the case of non-agricultural products, the average tariff increased mainly as a result of a hike in duties levied on leather, rubber, footwear, and travel goods from 12.8% to 15.4%.

India’s tariff rates range from zero to 150% with 67.8% of all tariff lines between 0% and 10%, 22.1% higher than 10% and up to 30%, and 4% tariff lines between with rates above 30%. “The most common tariff rates continue to be 10% (31.7%) and 7.5% (24.4%). The highest rates, above 60%, apply to products such as alcoholic beverages (150%), followed by animals and their products, fruit, vegetables and plants; coffee and tea, and certain motor vehicles, with tariffs of 100%," WTO said.

Trade policy reviews are an exercise mandated in WTO agreements, in which trade related policies of members are examined at regular intervals. Key developments that may impact the global trading system are also monitored. India’s previous trade policy review was conducted in 2015.

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Updated: 07 Jan 2021, 11:06 PM IST
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