Home / News / India /  India must lower tariffs, says Arvind Panagariya

India needs to rethink the big reversal in tariff liberalization if it wants to transform its predominantly traditional rural economy into a modern, urban, and industrial one over three to four decades as the economies of East Asia have done, former vice chairman of NITI Aayog Arvind Panagariya said on Friday.

“Rather than raise tariffs, India must lower them. It must return to its previous ambition of bringing tariffs down to levels prevailing in member countries of the Association of South East Asian Nations (Asean). The simple fact we must keep in mind is that when we expand imports in the wake of trade liberalization, we also expand exports to pay for the extra imports. As import and export expansion proceeds, we replace low-paid jobs in small import-competing firms by better-paid jobs in export-oriented firms," Panagariya said while delivering Exim Bank’s annual lecture titled “India’s Trade Policy: The Past, Present and Future".

Despite undisputable evidence of the benefits of trade openness, India has begun to reverse the process of liberalization in recent years, said Panagariya, a professor at Columbia University.

“The trend of rising tariffs has continued in 2021-22, with the latest budget proposing to raise the custom duties on numerous products," he said.

India should enter into free trade agreements with the UK and the EU as these are large markets and their agricultural sectors pose no threat to the livelihood of India’s farmers unlike that of the US, he said.

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