NEW DELHI, Feb 5 (Reuters) – India is set to review its import tariffs on more than 30 products, a move that could bolster trade with the United States amid growing global trade tensions, according to a senior finance ministry official.
The planned review, which will encompass a range of goods including luxury vehicles, solar cells, and chemicals, is intended to lower overall tariff rates, which could in turn stimulate increased imports from the U.S.
The announcement comes just ahead of Indian Prime Minister Narendra Modi’s upcoming visit to the United States next week.
To preempt potential tariff actions from the Trump administration, India has already reduced average import tariff rates to 11% from 13% on several items in its latest budget.
Sanjay Agarwal, chairman of the Central Board of Indirect Taxes and Customs, told Reuters in an interview that various government departments will consult local industry on reducing the Agriculture Infrastructure Development Cess (AIDC), an alternative import tariff collected by the Indian government for farm infrastructure development.
Following these industry consultations, the ministries will then decide which items from this list will be subject to potential tariff reductions.
India has historically used subsidies and high import tariffs to protect domestic industries like autos, pharmaceuticals, and agriculture. This move comes amid increasing pressure to foster better relations with the Trump administration.
The list of items includes 32 products, such as luxury cars, solar cells, yachts, devices used in building semiconductors, and other machinery, all of which currently face an AIDC tariff ranging from 6.5% to 70%, after the reduction of standard customs duties.
India’s average import tariffs, including the AIDC, are significantly higher than those of its major trading partners, including the United States, China, and Japan, the official acknowledged.
“We can’t take a giant step. We have to take baby steps,” Agarwal said, explaining India’s strategy of gradually reducing tariffs to protect domestic industries while boosting their competitiveness.
TRADE BALANCE WITH THE U.S.
Addressing President Trump’s concerns regarding the trade imbalance between the U.S. and India, Agarwal stated that import tariffs on goods coming from the United States are relatively low. He also noted that imports, especially of crude oil and liquefied natural gas, are likely to increase this year.
“Duty is not an issue in the oil sector. One (Indian) rupee per metric ton is the rate of duty on import of crude,” he said, suggesting that U.S. crude could become more attractive for India as supplies from Russia face increased sanctions.
India’s trade surplus with the U.S., which stood at an estimated $35 billion in 2023/24, has been a significant point of contention following Trump’s previous threats of imposing tariffs due to India’s high levies.
Analysts suggest that India’s imports of crude oil and LNG from the U.S., currently estimated at $6.5 billion in the 2023/24 fiscal year ending in March (out of total imports of $42 billion), could rise as a result of U.S. sanctions on Russian oil companies and China’s retaliatory tariffs on energy imports from the U.S.
“We got better prices from Russia. But the situation may change,” Agarwal said, adding that the trade imbalance could be “corrected.”
He indicated potential areas for increased imports, noting that India’s top 30 import items from the U.S., such as oil products and diamonds, fall within a low tariff category, with rates varying from 3% on airplanes to 7.5% on petrochemicals.
