India not a 'tariff king', but a competitive and accessible market

India's applied weighted average tariff stands at a remarkably modest 4.6 percent, a figure starkly contrasted by its simple average of 15.98 percent

One of India's fundamental challenges as it transitions into a global economic powerhouse has been to balance the need for global trade and investment with its long-term geo-strategic goals and the domestic interests of an economy in profound transition. In other words, India's core national interest requires finding the right levers of growth on international trade and reform in consonance with the need for inclusive development - including job creation and poverty alleviation.

In a country where a majority of the population is still largely rural or rurban, the complexity of India's economic landscape has meant that one thing has always stood out in how its economic choices have evolved: New Delhi's ability to position trade agreements as growth multipliers while also giving Indian artisans, goods makers and service providers easier barrier-free access to overseas markets.

The recent noise from Washington about tariffs that India imposes on goods entering its shores needs to be situated in this context. Contrary to the prevailing perceptions often circulated within the US policy circles, it is imperative to recognise that India does not, in fact, embody the archetype of the world's most protectionist economy.

The assertion that India maintains an excessively high tariff regime frequently stems from a fundamental methodological oversight, specifically the conflation of simple average tariffs with their more nuanced, trade-weighted (or import-weighted) counterparts, thereby obscuring the actual economic landscape of market access.

While simple averages, by their very nature, ascribe equal significance to every product category irrespective of its trade volume, the invaluable trade-weighted averages meticulously account for the actual duties incurred proportional to the import volumes, thus presenting a far more credible depiction of the real market accessibility and the aggregate financial burden on trade flows.

Indeed, India's applied weighted average tariff stands at a remarkably modest 4.6 percent, a figure starkly contrasted by its simple average of 15.98 percent; this substantial disparity validates that elevated tariffs are predominantly concentrated within a handful of low-import sectors, such as agriculture and the automotive industry, which collectively constitute but a negligible fraction of the overall commercial exchange between the United States and India.

This understanding is vital, for it underscores the multifaceted approach of India's tariff architecture that is broadly in consonance with established international trade norms, particularly when subjected to a cross-sectoral analysis and a comparative assessment against other economies.

Consider, for instance, the six paramount U.S. export categories to India—encompassing petroleum, liquefied natural gas (LNG), coal, a diverse array of pharmaceuticals, precision machinery parts, and critical fertilizers—which collectively command more than 45 percent of the total U.S. export volume to the subcontinent, yet confront average tariffs well below 5 percent, and only on rare occasions exceed the 10 percent threshold, mirroring the pragmatic and accessible nature of India’s burgeoning market for key American goods.

Other dominant American exports destined for the Indian market—including pharmaceuticals, vital energy products, intricate machinery, and essential chemicals—are consistently subjected to comparatively tempered tariff rates, facilitating a more unencumbered flow of these goods to India.

Medical devices, which account for 4.60 percent of total U.S. imports, are subject to a tariff spectrum ranging from 5 percent to 7.5 percent, indicative of a policy that prioritises public health while acknowledging commercial realities. Import of cutting-edge aircraft and their intricate parts, too, benefit from an exceptionally low tariff of 2.50 percent, a strategic concession intended to facilitate technological advancement and defence cooperation.

Fertilisers, which directly underpins India's agricultural productivity and food security initiatives, comprise 1 percent of the overall imports, attract tariffs ranging from 7.5 percent to 10 percent, a policy that seeks to support domestic agriculture while managing international supply dynamics.

In electronics and technology, a sector foundational to modern economic prowess, India maintains an impressively accommodating stance, levying a negligible 0 percent tariff on the majority of IT hardware, semiconductors, and associated computer components; though it must be noted, the average Most Favored Nation (MFN) rate for electronics generally stands at 10.9 percent, with computing machinery averaging 8.3 percent.

This contrasts sharply with Vietnam, where the average MFN rate on electronic equipment registers at 8.5 percent, yet can escalate significantly, reaching up to 35 percent, and even a formidable 50 percent for computing machinery.

Similarly, China, a global manufacturing behemoth, imposes an average MFN rate of 5.4 percent on electronics, with tariffs extending to 20 percent, and on computing machinery, they can ascend to 25 percent, often accompanied by specific restrictions predicated upon the technology's sensitivity.

Indonesia’s tariff regime on electronic equipment averages 6.3 percent, with potential increases up to 20 percent, and for computing machinery, tariffs can climb to 30 percent, collectively illustrating India's comparatively liberal import policy within this critical technological sphere.

Beyond the realm of tariffs, it is equally significant to underline that India's non-tariff barriers and regulatory standards are demonstrably less stringent than those encountered within the economic frameworks of the European Union, Japan, or even the People's Republic of China.

Thus, far from warranting the pejorative epithet of a "tariff king," India today unequivocally presents itself as one of the most remarkably open and eminently accessible large markets for U.S. exporters, offering a vast landscape of opportunity that demands a more discerning and informed perspective.