Custom duty rejig in Budget not a 'knee-jerk' reaction to global developments, says FM Sitharaman

Finance Minister Nirmala Sitharaman. (File photo/PTI)

India's decision to rationalise customs duties on a range of products in the Budget for 2025-26 was not a "knee-jerk" reaction to any global developments, Finance Minister Nirmala Sitharaman said on February 8.

"The Budget announcement around custom duty rationalisation has been in the works for the last two years, we had rationalised even two years. Whatever steps were taken in Budget on custom duty changes was not in a knee jerk fashion to any developments globally," Sitharaman said during a briefing in New Delhi.

She emphasised that while the government is committed to boosting local manufacturing by providing tariff protections to certain sectors, especially though MSMEs, it is also looking to make India more attractive for investments and trade.

"This is an ongoing process we want to make India a lot more investment friendly, trade friendly but at the same time balance it with Make in India. Wherever we need to have production particularly though MSMEs, we will provide tariff protection as required by the industry," she added.

Sitharaman's comments come at a time when many have attributed the changes made in customs duties in the Budget as a reaction to US President Donald Trump's statement labelling India as a "tariff king".

The US has already initiated trade wars with China, Canada and Mexico by imposing 25 percent tariffs on Canadian and Mexican imports, and 10 percent more on Chinese goods.

While, Mexico and Canada have got a month’s breather as they struck last-minute deals on February 3, China retaliated at US with its own set of tariff measures on February 4.

The Union Budget for 2025-26, presented by Sitharaman on February 1 introduced significant changes to its indirect tariff structure to support domestic manufacturing, and boost exports.

While the basic customs duty on flat panel display was increased from 10 percent to 20 percent, the levy on open cell was lowered to 5 percent.

Apart from that, 35 more capital goods for EV battery manufacturing have been exempted from basic customs duty, while seven tariff rates were entirely removed.