Leading developing countries such as Vietnam impose 47% less tariff than India at 9.6%, with its trade-weighted average duty being 5.1%. Similarly, Brazil and Mexico also have a lower tariff profile than India.
Capital goods
In the last 11 years, the gap between India’s average MFN rate and the corresponding global rate nearly doubled. India raised tariffs on imports of not only non-essential goods but also on intermediate and capital goods that are used in the manufacturing process.
In the last 11 years, India’s trade-weighted average MFN rate rose 48% (from 7.7% to 11.4%), while the global average decreased by 8% (from 7.5% to 6.9%). On an average, India imposes higher import duties on capital goods such as electrical machinery (10.7%), non-electrical machinery (8.2%), and transport equipment (29.1%), compared to the global average tariff.
The report suggests that India may reconsider its import tariff structure, particularly for capital goods, in order to attract investment in domestic manufacturing. India can learn from Japan’s approach to strategically use imports by lowering duties on critical intermediate and capital goods as high import duties may deter foreign investors.According to the report, India had the highest import duties globally, with an average Most Favored Nation (MFN) rate of 18.1%, twice the global average. India’s trade-weighted average duty was also 1.7 times higher than the global average.
