WTO: India frequently changing tariffs creates trade uncertainties

India’s frequent changes in tariff rates and use of other trade policy instruments such as export tariffs and minimum import prices, to manage demand and supply and protect its economy, create uncertainty for traders, the World Trade Organization (WTO) Secretariat has observed in its latest trade policy review of India.

The WTO, in its 175-page report on developments in India’s trade policy since the last review in June 2015, said India continues to be an active user of anti-dumping measures and is currently the main user in the WTO.

The seventh review of the trade policies and practices of India, which began on January 6, will continue for three days, till January 8, and will be based on the report by the WTO Secretariat and a second one by the Government of India.

Strong fundamentals

In its report, India said the fundamentals of the Indian economy were strong and this had ensured macroeconomic stability. “During the period under review, the government has focused on carrying out structural reforms and ensuring inclusive growth. These reforms, along with a host of measures taken by the government after the outbreak of Covid-19, should enable the country to bounce back on its targeted growth path,” the report pointed out.

The WTO Secretariat, too, observed that strong economic growth led to an improvement in socio-economic indicators in India, such as per-capita income and life expectancy. It, however, said given India's continued need for better infrastructure, subsidies will need to be reduced and better targeted to free up resources for investment.

On India’s use of anti-dumping measures, the report pointed out that during 2015-19 (as of December 2019), India initiated 233 investigations, as opposed to just 82 in 2011-14 (June). “Most of the investigations initiated during the review period relate to products originating in China, followed by those originating in the Republic of Korea and the EU-28,” the report said.

The simple average applied MFN tariff (Most Favoured Nation import tariffs applied on all WTO member countries) increased to 14.3 per cent in 2020-21, from 13 per cent in 2014-15. The report said while at the time of the last review, the average tariff had also increased to 13 per cent in 2014-15 from 12 per cent in 2010-11, it was mainly due to an increase in the tariffs affecting agricultural products (36.4 per cent in 2014-15). However, in 2019-20, the increase in average tariff was due to an increase in the average tariff of non-agricultural goods, which rose to 10.8 per cent from 9.5 per cent.

“The Trade Policy in India would continue to endeavour to build synergies with ongoing initiatives, with a strong focus on diversification of exports, and with an aim to properly anchor the elements of foreign trade within a composite approach to economic development,” India’s report said.