India’s Tariff Reduction Surpasses Global Trends, Analysis Shows

India’s trade landscape has undergone a significant transformation, with its weighted mean tariff dropping to 4.6 percent in 2022. This figure positions India below the global median, according to an analysis by Moneycontrol based on data from the World Bank. Out of 144 economies examined, India ranks 64th, boasting lower tariffs than several of its South Asian neighbours and partners in the BRICS group, including Bangladesh, Pakistan, and Brazil.

This data challenges the narrative from the United States, which has labelled India as a “tariff king.” Currently, the U.S. imposes a 25 percent duty, plus penalties, on Indian exports, whereas it applies only a 20 percent duty on Bangladesh and a 10 percent duty on Brazil. The implications of these tariffs underline a complex relationship between the nations, particularly in light of India’s substantial tariff reductions.

Historical Context of India’s Tariff Reduction

India’s commitment to lowering tariffs is underscored by a remarkable reduction of over 80 percent between 2001 and 2022. In comparison, tariffs in the European Union decreased by 61 percent, while Thailand saw a reduction of 56 percent during the same timeframe. The historical context reveals a pattern of liberalisation that began in 1991, when India’s average tariff rate stood at a staggering 80.9 percent. Following economic reforms, this rate decreased to 56 percent and further to 33 percent by 1999, ultimately reaching its current level.

The weighted average tariff, which provides a more accurate reflection of India’s trade structure, has plummeted from 56 percent in 1990 to 4.6 percent today. This sharp decline from 7.3 percent to 4.6 percent in just the last decade illustrates India’s ongoing push towards a more open and competitive trade environment.

Trade Relations and Future Implications

Despite ongoing global protectionism and geopolitical tensions, India’s trade policy remains focused on long-term liberalisation. This is evident in recent developments where retaliatory tariffs on key American agricultural exports, such as apples, walnuts, and almonds, were lifted in 2023 following the resolution of disputes at the World Trade Organization (WTO).

These changes signal a shift in international trade dynamics and highlight India’s role as a significant player in global markets. As India continues to balance its domestic priorities and strategic sectors, the effects of its reduced tariffs may resonate beyond its borders, influencing trade relationships and economic growth worldwide.