Ali Hasan
The world trade organization (WTO) isn’t much impressed by India’s trade tariffs and said that India needs to reduce their tariffs. They said that frequently changing of tariffs creates trade uncertainties between nations.
India’s average tariffs have 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.
“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 factors.
The report called for a reduction of the tariff for making it simple and more predictable. 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% in 31.7% of the cases and 7.5% in 24.4% of the cases.
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.
The 7th review of the trade policies and practices of India, which began on January 6, will continue for 3 days, till January 8, and will be based on the report by the WTO Secretariat and a second one by the Government of India. The total report was of 175-page.
On the other hand, they also said that the fundamentals of the Indian economy were strong and this had ensured macroeconomic stability. “During the period under review, the government has focused on carrying out structural reforms and ensuring inclusive growth. These reforms, along with a host of measures taken by the government after the outbreak of Covid-19, should enable the country to bounce back on its targeted growth path.
The WTO Secretariat, too, observed that strong economic growth led to an improvement in socio-economic indicators in India, such as per-capita income and life expectancy. It, however, said given India’s continued need for better infrastructure, subsidies will need to be reduced and better targeted to free up resources for investment.
The Trade Policy in India would continue to endeavour to build synergies with ongoing initiatives, with a strong focus on diversification of exports, and with an aim to properly anchor the elements of foreign trade within a composite approach to economic development.
WTO also lauded India for clocking 7.4% economic growth in the past 5 years and for steps taken in liberalising foreign direct investment policy and improving ease of doing business. They also appreciated India’s goods and services tax, reforms on taxation, trade facilitation and improving the ease of doing business, and liberalised regimes for FDI and intellectual property rights at the second and final session of its Trade Policy Review (TPR).
