Context:
India’s customs duty ranks among the highest in the world. In 2023, India’s average import duty was found around 17 percent, this is still on the higher side in comparison to U.S. imports (3.3%) and those of other BRICS.
For Reference, Brazil stands with India at 11 percent, second to that higher than 7 percent of China and South Africa respectively. Lower aiming European Union tariffs are indexed at 5 percent and Russia at 6.6 percent.
Agricultural Tariffs increase averages
- Agriculture Protection
- India levied exceedingly high tariffs (most years greater than 38 percent) on agricultural products to protect its farmers.
- Non Agriculture
- For almost all product groups, the period from 2018 to 2023 has been below 15%.
- Justification
- Tariff protection is, because of its inefficient nature due primarily to poor agricultural investment (i.e. 6% of total investment), a compelling necessity in India.
Tariff Movement on Product wise Basis
- High Tariffs Bracket
- Agricultural working in excess of 30% is the duty; including dairy products, beverages, and tobacco.
- Tariff Reductions
- Transport equipment, cotton, and textiles have reduced tariffs since 2018.
- Tariff Increases
- Higher tariffs were imposed on electrical machinery, leather/footwear, and industrial goods.
U.S. pressure and trade disputes.
- Trump Tariff Warning
- “Reciprocal tariffs” are threatens by U.S. on countries that impose major import duties.
- Tariff Reduction by India
- Recently reduced the tariffs from 150% to 100%. Criticism by U.S. on tariffs on Bourbon whiskey.
- Trade Surplus or Imbalance
- The trade surplus has increased with Indian exports to the U.S. exceeding $53 billion during FY25 (April November).
Implications for India U.S. Trade Relations
- Reciprocal Tariffs Threat
- Could pressure India to lower agricultural tariffs which it has flatly refused to negotiate under FTAs.
- Bilateral Trade Negotiations
- The U.S. would most likely still insist on a wider opening for U.S. agricultural products in future rounds.
- India’s Stance
- Is unwilling to concede on sensitive items like cereals, but may have to in any bilateral negotiations.
India has been applying very high rates on imports to agriculture in particular to protect domestic producers, and these India tariffs were thus brought under U.S. scrutiny. Conversely, India is inclined to hold on to its tariffs. Enough compromises may come through trade talks with the U.S., which might well see some serious demands for market access.
