India open to lifting tariffs on certain goods provided it does not hurt local manufacturing

Every tariff we have levied is not to control imports: FM Sitharaman reacts to Trump's comments

Reacting to US President-elect Donald Trump's recent comments about India being a "tariff abuser", India's Finance Minister Nirmala Sitharaman said that the country is open to lifting duties on certain goods provided it does not hurt local manufacturing capacities.

"Imports are required. Intermediary goods are required to be imported, I will have to encourage that, I will lift the tariffs on them provided it doesn't, unintended or intended, hurt my own capacities to produce. I have to balance the two," Sitharaman said at an event on November 12.

Sitharaman's comments offer a clue on how India plans to navigate an oncoming Trump Presidency in the US which may come with higher tariffs on several partner countries.

This given that in the run-up to the US elections, the former president has repeatedly called out India's "high tariffs" and vowed to introduce a reciprocal tax against New Delhi if elected to office.

In response, Sitharaman said that India's has not levied duties to discourage imports but to encourage domestic production.

"It is possible to explain every tariff we have levied, it is not to control imports, but yet I have a responsibility to the companies and capacities that exist in India. We have a moral authority to protect those industries that are growing and producing in India as much as there is a requirement to encourage industries that need certain imports," Sitharaman said.

The US is India's largest trading partner, with annual trade exceeding $190 billion. Between FY20 and FY24, India's merchandise exports to the US rose by 46 percent, from $53.1 billion to $77.5 billion. Imports from the US also grew, from $35.8 billion to $42.2 billion, a rise of 17.9 percent.

Moving on to the issue of foreign direct investment, Sitharaman said that while the country encourages more FDI, it will remain vigilant about the source of such inflows.

"We want to be clear about where exactly the FDI is coming from, we are not stopping investment, we just want to be clear about the source of the FDI. We want more FDI, we welcome it, but we also want to be sure that who is bringing that investment," she said.

Since April 22, 2020, India administers higher checks on FDI from entities of a country sharing a land border with it, including China, in order to curb opportunistic takeovers or acquisitions of Indian companies.

On the debate around de-dollarisation, Sitharaman explained the goal is not to replace the US dollar with the rupee.

"On de-dollarisation, I am looking at India setting a different track with nations that do not have huge dollar reserve. We have started doing this exercise of talking to countries which want to have a rupee relationship. So we allow them to use rupees, pay us back in rupees and fund them in certain activities. With Russia, now it is possible to do some give and take in trade in rupee and ruble," she said.

She added that regional arrangements with regional currencies are now being worked up, so regional trade agreements do not collapse for want of dollars.