Agricultural protectionism pushes up India’s import tariff

India’s import tariffs are five times that of the U.S. and the highest among BRICS nations

Tariffs levied on imports into India are five times higher than what the United States levies on its imports. The average duty levied by India was 17% in 2023, compared to 3.3% levied by the U.S. Also, the average tariff levied by India was the highest among comparable economies, especially BRICS countries. India was followed by Brazil (11%), and South Africa and China (more than 7%). The average tariff levied by Russia was 6.6.% and that by the European Union was 5% (Chart 1).

Despite the difference in the average tariffs levied by India and the U.S., the number of products subject to tariffs remains comparable in both countries (Chart 2).

India’s higher average was mostly due to high tariffs on agricultural products to protect domestic producers. “While tariffs on agricultural goods are really high, it is not so on manufactured products,” explains Biswajit Dhar, Distinguished Professor, Council for Social Development.

Chart 3 shows that the average tariff levied by India on non-agricultural goods was less than 15% between 2018 and 2023. The duty on agricultural goods, however, has always been more than twice the duty on non-agricultural products, and exceeded 38% in all years except in 2020.

Protected Food security and livelihood

Dhar argues that the reason why India continues to levy high agricultural tariffs is to protect food security and livelihoods. He points out that since investment in agriculture is low — just about 6% of the total investment in the country — the sector remains significantly inefficient by global standards. “Agricultural tariffs cannot be brought down easily. The U.S. has very high subsidies on agricultural products. If there are many subsidised U.S. agricultural products floating about in the market, it is very difficult for us [India] to reduce our tariffs,” he says. Unless the government decides to pull up this sector by the bootstraps, it will not be able to stand up to international competition, Dhar adds.

A closer look at product-wise tariffs shows that agricultural, dairy products, beverages, and tobacco continue to attract more than 30% as import duty (Table 4). Duty on transport equipment, cotton, and textiles came down between 2018 and 2023. Tariffs on electrical machinery, leather/footwear, and some manufactured goods increased in the same period.

U.S. President Donald Trump recently drew attention towards tariffs levied by various countries. He suggested that the U.S. would impose “reciprocal tariffs” on countries which, he believes, have treated the U.S. “unfairly”. While the finer details and the math of such tariffs are not clear yet, his remarks have caused considerable unease in India. Amid this criticism from the U.S., India has recently reduced tariffs on bourbon whiskey from 150% to 100%.

India is increasingly exporting more to the U.S., widening its trade surplus with the U.S. Goods exported to the U.S. from India have crossed $53 billion in FY25 (April-November) and exceeded 18% of India’s total exports from about 15% a decade ago (Chart 5).

“Tariffs are being imposed to block imports from partner countries into the U.S. But reciprocal tariffs could mean pressure on India to reduce agricultural tariffs. Because at the end of the day, the U.S. wants India to import more from them. And what better opportunity to do that than to force India to reduce its agricultural tariffs? This is going to be part of the bilateral trade agreement that they will be negotiating. India has maintained that negotiating tariffs on agricultural products, such as cereals, is off the table for Free Trade Agreements. But that will not be the case for India-U.S. bilateral negotiations,” Dhar adds.

Source : Dairynews7x7 Feb 25th 2025 The Hindu