Industry must gear up for lower tariffs, looking at further easing of FDI norms: DPIIT Secretary

“There are a whole bunch of FTA negotiations that are currently underway and my own anticipation is that we are going to see India becoming a little less conservative when it comes to these FTAs. And I think all of us, all of you as an industry should prepare yourselves for a lower tariff regime in the long run,” Singh said during the Confederation of Indian Industry (CII) Annual Business Summit 2024.

“There are many commodities where both on the GST side and on the custom duty side, we continue to have inverted duty structures which affect our competitiveness and affect our export capabilities. DPIIT is doing a cross-sectoral study to ensure that both in the GST council and through the finance ministry we try to rationalize and ensure that those inversions are removed to improve the competitiveness of our manufacturing sector,” DPIIT secretary said.

Average tariffs in India jumped to 18.1 per cent in 2022 from 13 per cent eight years ago in 2014 which resulted in uncompetitiveness among the Indian industry compared to countries such as Vietnam, Thailand and Mexico. On high tariffs commerce minister Piyush Goyal had earlier told the Indian Express that India’s tariff structure doesn’t necessarily go only by averages but by the effective rate on each product. So most of our products are under 10 per cent, some may have five, some 7.5 per cent and then there are a few outliers, Goyal said.

“Even today, the US has some of the highest tariffs on individual items, as high as 300 per cent. Among emerging economies, we are at comparable levels. More so because some of them don’t have transparent economic or pricing systems,” the minister said.

Defending the criticism over the production linked incentive scheme (PLI), DPIIT secretary said that every country that used to lecture us about tariffs and subsidies are today in the subsidy and tariff game in an even bigger manner. This came after the United States raised tariffs on a range of Chinese products and the European Union indicated it could use similar measures.

“If you see in terms of sheer numbers, we’ve far facilitated almost 1.13 lakh crore of investment which resulted in over nine lakh crore of sales and created over eight lakhs of employment. Exports of 3.45 lakh crore, particularly through the contribution of sectors like large scale electronics, manufacturing pharma, food processing, telecom, and other products were achieved,” Singh said.

He further took on criticism over low domestic value addition (DVA) in several PLI sectors especially electronics.

“The criticism that PLI sometimes faces, because every critic has a different perspective on what success means, so some will say that, okay, mobiles are doing well but where is the domestic value addition? Ignoring the fact that DVA takes time but it has delivered tremendously in terms of employment,” he said.

On semiconductors, the secretary said, critics point out that the industry is capital intensive in nature but they ignore the fact that the purpose is strategic in nature. “When we make these large investments in the semiconductor space… the discussion is that it is a capital incentive and hence not suitable for India. And that it’s not labor intensive enough ..losing sight of the fact that the target is not labor intensity or employment but strategic autonomy and ensuring that we don’t become overly dependent on insecure supply chains,” he said