A parliamentary committee has recommended the government to cut tariffs on imports of raw materials in a bid to support local manufacturers, who are expected to come under more pressure in the looming trade talks with Washington.
The committee, set up to examine trade and commerce legislation, said tariffs on incoming raw materials should be lower than imported finished goods to help local makers compete.
India is preparing to kick off negotiations on a trade pact with the administration of US President Donald Trump, who has been pushing for significantly lower duties on US goods coming into India.
India is also planning to seal free trade agreements with the European Union and New Zealand this year and has expedited talks with Britain over a trade deal.
The report released by the committee did not mention the upcoming US trade talks but said it wanted to ensure “a level playing field for domestic manufacturers”.
“The committee recommends implementing matching tariff reductions that adjust tariffs on raw materials in response to lower import duties on finished goods,” it said.
The panel recommendation seeks to correct so-called inverted duty structures or instances where tariffs on imports of raw materials and intermediate goods are higher than duties on incoming finished products, effectively encouraging imports over local production.
The committee also asked for a comprehensive review of all existing free trade agreements to identify sectors where tariffs on raw materials are higher than on final finished goods.
India’s complicated tariff structure is often cited as a deterrent to efficient local production and a cause of disputes.
The parliamentary panel recommendation is a rare instance suggesting tariff cut as most of the manufacturing industries are still batting for protection, citing examples of other nations. Earlier this week, the commerce ministry had recommended higher duty on steel plates and coils coming to the country.