India may cut more import taxes as manufacturing picks up speed

India will continue to bring down tariffs and phase out additional levies on imports as domestic manufacturing improves, a top finance ministry official said, ahead of Prime Minister Narendra Modi’s visit to the US.

“We will soon start stakeholder consultations with ministries on whether rates can be lowered further without impacting the industry,” Sanjay Agarwal, chairman of the country’s Central Board of Indirect Taxes and Customs, told Bloomberg News in an interview Thursday. “As value chains get deeper, custom duties must be reduced otherwise inefficiencies set in,” he said, without specifying when the levies will be reduced.

The South Asian nation made significant cuts to import tariffs in its budget on a range of products, including motorcycles made by Harley-Davidson Inc., to shake off the “tariff king” label it earned from US President Donald Trump.


For instance, effective tax charged on cars priced above $40,000 stood at 110% before the federal budget last week. While the government has slashed basic custom duty on such cars to 70% from 125%, additional levies have been imposed to maintain the effective tax at 110%. Tesla had earlier asked India to lower taxes and remove additional levies.

Agarwal said the levies are “temporary in nature and would eventually be phased out.”

Traditionally, India has protected domestic industries such as automobiles and pharmaceuticals through government incentives and high import tariffs.

The Modi government has delivered a series of concessions to the White House on issues core to Trump’s agenda ahead of the two leaders’ meeting in Washington next week. New Delhi also pledged to accept thousands of unlawful migrants from the US and maintain the dollar as its trading currency.

“India wants to be seen doing things that matter for Trump and is trying to be preemptive before explicit demands are made,” said Harsh Pant, a professor of International Relations at King’s College London, on Friday. Relations between India and the US have been friendly in the last few years and the recent moves “will help mitigate any dramatic change in approach in the near future,” he said.