Budget push: India weighs duty hikes, incentives to cut reliance on China-led imports

The government has prepared a list of around 100 products that may be eligible for such support.

• India may raise import duties and offer incentives for select products in Budget.
• Govt aims to cut trade deficit, reduce reliance on single-country supply chains
• China remains a major supplier, accounting for large shares of key imports

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India is considering a mix of higher customs duties and targeted incentives for select products where imports remain elevated despite domestic manufacturing capacity, as part of an effort to rein in the merchandise trade deficit and reduce reliance on single-country supply chains, an Economic Times report said on Monday.

The proposed measures could be announced in the forthcoming Union Budget, people familiar with the matter told the Economic Times.

Policymakers are focusing on products where import dependence on specific geographies is particularly high. "There are certain goods in which we have high dependence on some geographies. We want to de-risk imports," an official said, as quoted by the Economic Times. The approach under discussion involves offering fiscal support for some items while raising import duties on others, the official added.

The Economic Times noted that the government has prepared a list of around 100 products that may be eligible for such support. These include engineering goods, steel products and machinery, along with consumer items such as suitcases and flooring materials. Import duties on many of these products are currently in the 7.5-10% range.

The push comes against the backdrop of a widening trade gap. Data cited by the Economic Times show that India exported goods worth $292 billion during April-November of FY26, while imports stood at $515.2 billion in the same period, highlighting growing concerns within the government over external vulnerabilities.

Industry has also been encouraged to reduce dependence on single-source supply chains and strengthen domestic sourcing, the Economic Times reported, quoting a person aware of the discussions. However, challenges remain. "The issue is low quality of certain locally produced goods and higher prices that are not competitive with imports," a steel industry representative told the Economic Times.

China continues to be a dominant supplier across multiple categories. As per figures cited by the Economic Times, India imported $20.85 million worth of umbrellas in FY25, of which $17.7 million came from China. Imports of spectacles and goggles were valued at about $114 million in 2024-25, with roughly half sourced from China and a sizeable portion routed through Hong Kong, while Italy emerged as the third-largest supplier. China also accounts for as much as 90% of India's imports of certain agricultural machinery, the report said.

This dependence is reflected in bilateral trade numbers. The Economic Times pointed out that India's goods exports to China amounted to $12.2 billion in April-November FY26, while imports from China were $84.2 billion, resulting in a trade deficit of around $72 billion.