Political rhetoric is often unrelated to reality. The narrative about India’s tariffs, particularly from the U.S. administration is one such example. Trade data put out by multilateral organisations such as WTO show that India fares well not only when compared with its peer group, but also middle income economies with a significantly higher per capita income.
The story about India being an economy functioning behind high tariff walls is just that, a tall tale. The reality is that countries such as the U.S. push a significant proportion of their exports to India at a tariff level below 5%. That is not even half of the 10% levy the U.S. has proposed on imports.
A tale of averages
A simple average of India’s tariff is 15.9%, well within the country’s obligation under WTO rules but one deemed high by trade partners such as the U.S. Even at that level, it’s not an outlier.
Consider the case of Turkiye, a NATO member with a per capita income higher than India. WTO data shows that the simple average most favoured nation (MFN) applied tariff for Turkiye was 17.3% in 2024. Should Turkiye be called a tariff caliph?
Simple averages include both agriculture and non-agriculture. Typically, countries levy a higher tariff on agriculture to protect what’s not just a sensitive sector from the standpoint of food security, but also one that has cultural connotations.
In the U.S., for example, WTO data shows that dairy had an import share of a mere 0.1% in 2024. Yet, the average MFN applied duties for this sector was 17.2%, with the maximum rate at a mind boggling 200%. The country that boasts of Silicon Valley feels the need to mollycoddle its dairy farms behind a tariff rampart. Could there be a cultural reason for it?
To put matters in the right context, it’s more useful to look at import weighted tariffs. It represents trade-weighted averages based on import volumes. It’s a better measure of the level of protection in a country when it comes to the bulk of global trade.
In the case of India, the weighted average tariff is 4.6% which is what accounts for a significant proportion of U.S. exports to India coming in at a levy below 5%. A high technology product such as aircraft and its parts come in at a levy of 2.5%. LNG imports from the U.S. are brought in at a tariff of 2.75%.
India’s tariff barriers are in line with Asian peers
India imports the lion’s share of IT hardware without levying a tariff. Even in the case of semiconductors, that is the case. The U.S. is a direct beneficiary as companies American companies are a crucial link in the R&D and design stage of the semiconductor supply chain.
One of the largest markets in the world does allow many critical components to come in without levying a tariff.
India’s average MFN rate on electronics is 10%, which is not really out of line with Vietnam’s average MFN of 8.5%.
Non-Tariff Barriers
Non-tariff barriers, which represent roadblocks to an exporter in the form of regulatory requirements, are often seen as a way to protect a home market. This is a slightly fuzzy area because unlike tariffs they are hard to measure.
That has not deterred economists from trying to measure them and their efforts suggest India is once again a victim of a narrative rather than evidence-based arguments.
In 2020, UNCTAD measured non-tariff barriers of key Asian markets to gauge the extent to which they offer domestic businesses protection. In terms of the prevalence score, a measure of the compliance required even before the merchandise has left the exporting country’s border, India fared reasonably well. It did better than Japan and South Korea, two countries the U.S. has been willing to strike relatively favourable bargains with.
China, another country the U.S. has been willing to go easy on, had a prevalence score that was almost twice as high as India. Clearly, East Asia’s dynamic economies have a higher level of protection through non-tariff barriers.
India has become the whipping boy in some trade circles. They are spaces where conclusions are reached without any recourse to trade data in the public domain. It must be a new kind non-tariff barrier to fair trade.
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