India’s Tariff Landscape - ECONOMY
NEWS: India has taken significant steps to lower its tariff levels,
aligning them with the global average to enhance its integration into
international supply chains.
WHAT’S IN THE
NEWS?
Domestic industries continue to pressure the government to
increase tariffs. This issue was brought to light by Amardeep Singh Bhatia, DPIIT Secretary, during the CII Global Economic Policy Summit, emphasizing the
need for a deeper analysis of the reasons behind such demands.
Tariff Reductions and Domestic Pressures
Reduction in Tariffs for Global Integration
•
India’s weighted average tariff rate has been substantially
reduced over the years, making it comparable to the global average.
•
This reduction is part of India’s strategy to integrate more
effectively into global supply chains and foster greater trade connectivity.
Challenges Highlighted by Domestic Industry
•
Despite the reductions, domestic industries have consistently
called for higher tariffs, citing challenges in maintaining competitiveness
against foreign imports.
•
Bhatia raised a pertinent question, “Why are we not competitive
enough?” indicating the need to address structural inefficiencies within
industries rather than relying solely on tariff protection.
Global Context: Criticism and Opportunities
Trump’s Criticism of High-Tariff Nations
•
Bhatia’s observations are particularly relevant in light of Donald Trump’s criticism of high-tariff countries,
including India.
•
Trump’s stance, coupled with growing demands from sectors such as steel, highlights the tension between global trade
liberalization and domestic protectionism.
Opportunities Amid Supply Chain Disruptions
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The global supply chain disruptions caused by the Covid-19 pandemic present unique opportunities for
Indian industries to enhance their market position.
•
Bhatia noted that advancements in new
technologies, materials, and sectors provide Indian companies with the
potential to innovate and compete globally.
Growth of the Start-Up Ecosystem
Expansion into Tier-2 and Tier-3 Cities
•
India’s start-up ecosystem has witnessed remarkable growth, with
around 45% of start-ups emerging from tier-2
and tier-3 cities.
•
This trend reflects the democratization of entrepreneurial
opportunities, extending beyond traditional metropolitan hubs.
Sector-Specific Interventions
•
To sustain this growth, the government is implementing sector-specific interventions aimed at addressing
challenges unique to various industries.
•
These initiatives are designed to deepen the start-up movement and
attract global collaborations, which are
increasingly becoming a hallmark of India’s entrepreneurial landscape.
Workforce Training and Skill Development
Enhancing Workforce Employability
•
Labour Secretary Sumita
Dawra
highlighted significant progress in formalizing the workforce, with over 7 crore Indians joining the Employees’ Provident Fund Organisation (EPFO) since
2017.
•
The government is actively rolling out initiatives to improve the skill sets and employability of the
workforce to meet the demands of a dynamic economy.
Focus on Skilling Initiatives
•
The emphasis on skilling initiatives is aimed at bridging the gap
between industry requirements and workforce capabilities, ensuring a steady
supply of qualified professionals in critical sectors.
Job Creation and Incentivization
Employment Linked Incentive (ELI) Scheme
•
The government has introduced the Employment
Linked Incentive (ELI) Scheme, which incentivizes companies to hire more
workers, particularly in the manufacturing sector.
•
This scheme offsets the cost of employing new workers, encouraging
businesses to expand their operations and contribute to job creation.
Boosting Manufacturing and Formal Employment
•
By supporting the formalization of labour, the ELI scheme aims to
enhance the employability of workers and drive growth in key manufacturing
industries.
•
It aligns with the government’s broader objectives of fostering
economic growth and reducing unemployment.
Conclusion
India’s efforts to lower tariffs and align with global norms
reflect its commitment to international trade and economic integration.
However, the persistent demands for higher tariffs from domestic industries
highlight underlying competitiveness challenges that need to be addressed.
Simultaneously, opportunities stemming from supply chain disruptions and
technological advancements provide avenues for Indian businesses to thrive. The
government’s focus on fostering the start-up ecosystem, enhancing workforce
skills, and incentivizing job creation underscores a multi-faceted strategy to
drive sustainable economic growth and strengthen India’s position in the global
marketplace.