India Ditches Protectionism, Lowers Import Duties on Key Products

In a significant shift towards a more open economy, India's government has announced a reduction in import duties on a wide range of products, effective from February 2. The move is seen as a signal to both domestic industries and international investors, amid growing trade tensions between the US and its neighbors.

Finance Secretary Tuhin Kanta Pandey emphasized that India is no longer embracing high tariffs as a means of economic protection. "We want to send out a signal that we don't believe in protectionism," he said. The country's tariffs are already lower than those in advanced economies such as Japan, and the government aims to provide a stable and predictable policy environment for investors.

The tariff cuts mark a significant shift away from India's traditionally protective trade policies. Import duties on solar modules have been reduced, while high-end motorcycles will no longer face significant tariffs. The move is seen as a welcome change by domestic industries, which have faced challenges in competing with imports due to high tariffs.

In the wake of rising tensions between the US and China, India's move has sent a message that it is committed to trade liberalization and cooperation. Finance Secretary Pandey confirmed that the government will adhere to its fiscal deficit and borrowing targets, but warned that the upcoming budget would result in a revenue shortfall of one trillion rupees.

The new budget increases the personal income tax exemption limit and adjusts tax slabs, which are expected to stimulate consumption and investment. Creating a multiplier effect, these changes aim to boost economic growth and reduce the government's fiscal deficit.

Reacting to US President Trump's warning to BRICS countries about potential 100% tariffs if they attempt to replace the dollar with a new currency, Finance Secretary Pandey assured that India has "no intention" of replacing the dollar as the global reserve currency.