India’s import duties adhere to World Trade Organization (WTO) rules, and the government should communicate this effectively to the US administration, according to a report by the Global Trade Research Initiative (GTRI). The economic think tank also warned that negotiating a comprehensive Free Trade Agreement (FTA) with the US presents significant challenges due to American demands that India has long resisted.
India’s Tariffs Are in Line With WTO Rules
The GTRI report, released on Sunday, emphasized that India’s tariffs are WTO compliant, as they were negotiated and approved when the WTO was established in 1995. The US, along with other developed nations, had agreed to let developing economies maintain higher tariffs in return for commitments on intellectual property (TRIPS), services trade liberalization, and agricultural policies that primarily favored wealthier nations.
“India’s tariffs are consistent with WTO rules. They were agreed upon in a global trade settlement, which the US also approved. The Indian government must convey this to the US,” said GTRI Founder Ajay Srivastava.
The statement comes amid repeated allegations by former US President Donald Trump, who has labeled India a “tariff king” and “tariff abuser”, claiming that the country imposes excessively high import duties.
Challenges of a Free Trade Agreement with the US
According to GTRI, a US-India Free Trade Agreement (FTA) would be highly complex, as Washington is likely to push India to:
- Open government procurement to American firms.
- Reduce agricultural subsidies, which could impact Indian farmers.
- Weaken patent protections by allowing evergreening—a process where companies extend patents on drugs and other products to block generics.
- Ease data flow restrictions, potentially compromising India’s digital sovereignty.
India has resisted these demands for decades and remains unprepared to accept them, the report noted.
India’s Export Composition to the US
GTRI also pointed out that while India exports significantly to the US, the local value addition in many of these goods remains low. This means that much of what India ships to the US consists of imported components that are assembled locally.
Key sectors with low value addition in exports include:
- iPhones (manufactured in India but using foreign components).
- Solar panels (where critical parts are imported).
- Diamonds (mostly polished and re-exported).
- Petrochemicals (which involve refining imported crude oil).
Also read: GTRI Calls for Import Duty Cuts to Boost Manufacturing
India’s Best Response to Potential US Tariff Increases
The GTRI report outlined potential strategies India could adopt if the US imposes higher tariffs on Indian goods:
- Offer zero tariffs on most industrial goods to the US, which could prevent trade tensions.
- Absorb the new US tariffs without retaliation, similar to Lord Shiva consuming poison without swallowing it, as the report metaphorically suggested.
However, GTRI warned that negotiating an FTA might not be the best approach, as it could take years, and by then, the US could have already implemented reciprocal tariffs, rendering the deal ineffective.
As trade tensions loom, India’s response to US tariff pressures will be crucial in maintaining a balanced economic relationship while protecting its domestic industries.
