National input cost reduction strategy to check inverted duty structure

A national input cost reduction strategy is crucial to check the inverted duty structure, the Economic Survey said as it suggested a Swadeshi (indigenous) framework through a three-tier approach focusing on strategic urgency, feasibility and cost-effectiveness to lower input costs, strengthen advanced manufacturing and integrate India into global value chains.

The three tiers outlined in the survey are critical vulnerabilities with high strategic urgency, economically feasible capabilities with strategic payoffs and low strategic urgency or high-cost substitution.

“As tariffs and related geoeconomics become important in driving Make in India, industry needs support in becoming competitive both in the Indian market and across global value chains,” said Bipin Sapra, partner, EY India.


Besides, "intelligent indigenisation" backed by discipline, outward orientation, and credible exit mechanisms is key to deal with global challenges in India, according to the pre-Budget document.

“Customs duty rationalisation by removing higher tariff on inputs and intermediaries for making the final product manufacturing cheaper and competitive is the need of the hour,” Sapra added.

The survey said that a structured, rule-based distortion audit can guide reform, avoiding ad hoc adjustments as it prevents indigenisation from becoming across-the-board protection.

It also called for a forward-looking quality control order (QCO) framework incorporating a rigorous pre-notification assessment, calibrated transition periods (especially for micro, small and medium enterprises), adequate national testing capacity and a clear alignment with industry readiness.

QCOs on intermediates require exceptional caution, it added.