Rebalancing India’s Trade Policy: From Protection to Competitiveness

The geopolitical environment is increasingly uncertain and rapidly evolving, with significant implications for global value chain (GVC) integration, both in terms of the products traded and the countries involved. For India, this presents a mix of challenges and opportunities.

While reducing dependence on China remains an important policy objective, India must adopt a balanced and strategic approach. This involves carefully aligning its immediate supply requirements with the long-term goal of strengthening domestic capabilities. Accordingly, India’s tariff and non-tariff policies should reflect this balance, facilitating access to critical inputs while simultaneously supporting the development of competitive domestic industries.

Out of 3,927 HS-6-digit products analysed, approximately 92.5% of HS-6-digit product lines are subject to non-zero MFN tariffs.

India is among the more protected economies in Asia, with an average Most Favoured Nation (MFN)[1] tariff rate of about 17.6%. Import tariffs have seen a consistent surge since 2018. Alongside this, there has been a sharp rise in the issuance of non-tariff measures, including Quality Control Orders (QCOs)[2], as well as the continued reliance on Anti-dumping Duties (ADDs)[3] to curb low-priced imports. Measures like QCOs have impacted both domestic producers and importers, thus necessitating a detailed assessment of the existing import policies and their implications for trade flows.

Import Coverage by Key Trade Protection Measures

For this analysis, export, import, and tariff data for 2023 at the HS[4]-6-digit-level were assessed, along with existing ADDs and QCOs mapped to these products. Out of 3,927 HS-6-digit products analysed, approximately 92.5% of HS-6-digit product lines are subject to non-zero MFN tariffs. In contrast, 7.9% are covered under ADDs, and 8.6% are subject to QCOs (Table 1). In terms of value, ADD accounts for 9% of imports (around USD 40 billion), while QCO accounts for 11.3% (USD 50.7 billion). On the other hand, tariffs cover imports worth USD 410 billion, accounting for around 92% of total imports. These figures indicate that a large share of imports is subject to tariffs, thereby contributing to the cost of importing

Table 1: Coverage Under Protection Measures

Source: Author’s analysis.

The largest share, approximately 49% of all products assessed, falls within the 10–15% tariff range. In terms of trade value, this MFN tariff band covers imports worth USD 242 billion, accounting for around 54% of India’s total imports.

Import Coverage Across Different MFN Brackets and Types of Goods

An analysis of products across different tariff bands reveals that the largest share, approximately 49% of all products assessed, falls within the 10–15% tariff range [5]. In terms of trade value, this MFN tariff band covers imports worth USD 242 billion, accounting for around 54% of India’s total imports (Table 2). A high tariff bracket covering a large share of imports indicates a significant cost barrier to imports.

A closer examination further reveals that a substantial share of these tariff lines (66% of product lines, worth USD 138 billion) consists of intermediate and capital goods (Table 3). Such a structure undermines the competitiveness of Indian production and constrains the country’s ability to integrate into global supply chains.

Table 2: Coverage Under Most Favored Nation Brackets

Source: Author’s analysis.

Table 3: Distribution of Tariff Lines Across Types of Goods

Source: Author’s analysis.

QCOs are most prevalent (by product count) in the 15–20% MFN tariff bracket, affecting 25% of goods in that range. ADDs are concentrated in the 10–20% tariff bracket.

Overlap Between Most Favoured Nation Tariffs, Anti-Dumping Duties, and Quality Control Orders

When examining the combined application of different forms of protectionism, including MFN tariffs, ADDs and QCOs, it emerges that the 10–20% MFN tariff bracket not only contains the highest number of products overall but also has the largest concentration of products subject to both ADD and QCO measures (Table 4). QCOs are most prevalent (by product count) in the 15–20% MFN tariff bracket, affecting 25% of goods in that range. ADDs are concentrated in the 10–20% tariff bracket, representing the highest import values (approximately USD 26 billion in the 10–15% bracket). This indicates that products in this relatively high tariff range of 10–20% are disproportionately exposed to multiple layers of trade protection, implying a high level of composite protection.

Trade policy must adopt a supply-chain-wide perspective, ensuring that upstream inputs, particularly intermediate and capital goods, face zero or low import tariffs.

Table 4: Anti-dumping Duty and Quality Control Order Coverage Across Tariff Bands

Source: Author’s analysis.

Way Forward

Overall, there is a substantial overlap between tariff and non-tariff barriers. For products that are critical to supply chains, it is important to reassess these measures to minimise disruptions. Trade policy must adopt a supply-chain-wide perspective, ensuring that upstream inputs, particularly intermediate and capital goods, face zero or low import tariffs. This, in turn, can enhance the competitiveness of the entire value chain.

At the same time, trade policies alone are not solely responsible for a country’s competitiveness. Domestic ecosystem factors, such as infrastructure, logistics, and regulatory environment, are equally important. However, import tariffs continue to be a crucial determinant of firms’ ability to integrate efficiently into global value chains. In this context, it is important for India to actively negotiate and finalise trade agreements with key countries and regions, not only to secure better access to external markets, but also to enable competitive foreign inputs to enter the Indian market through lower tariff and non-tariff barriers.