India has highest applied MFN tariffs, lacks transparency: US
US trade report highlights India's highest applied MFN tariffs, regulatory unpredictability, and non-tariff barriers as significant obstacles for trade, urging reforms;
India has the highest applied MFN tariffs for any major global economy with 13.5 per cent average applied tariff rate for non-agricultural goods and 39 per cent for agricultural goods, alleges the latest US trade report. It criticised India’s frequent and unpredictable tariff hikes as a significant barrier, while urging to improve transparency, adhere to international standards, and enhance regulatory consistency
India maintains high applied tariffs on a wide range of goods, including vegetable oils (up to 45 per cent); apples, corn, and motorcycles (50 per cent); automobiles and flowers (60 per cent); natural rubber (70 per cent); coffee, raisins, and walnuts (100 per cent); and alcoholic beverages (150 per cent), finds United States Trade Representative (USTR)’s National Trade Estimate.
High basic customs duties are imposed on drug formulations, including life-saving drugs and finished medicines listed on the World Health Organization’s list of essential medicines. India’s National Pharmaceutical Pricing Authority (NPPA) caps prices of coronary stents and knee implants, without considering inflation and cost of production or technological innovation.
India provides a broad range of subsidies and support to its agricultural sector, including credit subsidies, debt waivers, crop insurance, and subsidies for inputs such as fertilizer, fuel, electricity, and seeds at both the central government and state government levels, which lower the cost of production for India’s producers and have the potential to distort the market.
From 2018 to present, several WTO Members have submitted seven counter notifications against India’s Minimum Support Price programme, covering several of the 25 agricultural products, including sugar, rice, and wheat.
India’s World Trade Organization (WTO) bound tariff rates on agricultural products are among the highest in the world, averaging 113.1 percent and ranging as high as 300 percent, it alleged. The large disparity between WTO bound and applied rates, provides flexibility to change tariff rates for both agricultural and non-agricultural products at any time, creating tremendous uncertainty for US workers, farmers, and exporters.
In June 2019, after the US withdrew India’s preferential tariff benefits under the Generalized System of Preferences (GSP) programme, India implemented retaliatory tariffs ranging from 1.7 per cent to 20 percent on 28 different products.
India maintains various forms of non-tariff barriers as products are banned or prohibited, items are required to have a non-automatic import license. There are items that are importable only by government trading monopolies and are subject to cabinet approval regarding import timing and quantity.
Since 2019, India has made a number of Bureau of India Standards (BIS) standards mandatory for quality control purposes in an increasing number of sectors, including chemicals, medical devices, batteries, electronics, food, and textiles. The means of verifying compliance vary.
The US also pointed to discriminatory requirements in India’s electronic payments market and restrictions on cloud and cybersecurity standards that disadvantage foreign firms. Barriers to foreign investment persist across key service sectors including retail, insurance, banking, and legal services, Strict sourcing requirements for FDI in multi-brand and single-brand retail, barriers to market entry for legal and accounting services pose challenges to the US.
US stakeholders report that regulatory changes often occur without adequate notice or stakeholder input. Ownership limits, local sourcing mandates, and uneven application of rules create market uncertainty. The US urged India to improve transparency, adhere to international standards, and enhance regulatory consistency. end