Change in Indian custom duty trend in last 20 years and recent impact of Make In India policy on Indian Customs Duty

Posted on April 15, 2024

Over the past two decades, the Indian custom duty trend has seen significant shifts in response to changes in the global economy and domestic policies. From liberalization in the 1990s to protectionist measures in recent years, Indian customs duty rates have fluctuated in response to evolving trade dynamics.

In the early 2000s, India began reducing its custom duty rates as part of its liberalization efforts to open up its economy to foreign investments and trade. This move aimed to increase competitiveness, attract foreign businesses, and boost exports. As a result, many industries benefited from lower custom duty rates, making imported goods more affordable and leading to increased consumer choices.

However, by the mid-2010s, the Indian government started implementing protectionist measures to promote domestic manufacturing under the “Make In India” initiative. Custom duty rates were hiked on several products to encourage local production and reduce dependency on imports. This shift aimed to create more job opportunities, boost domestic manufacturing, and reduce the trade deficit.

The recent impact of the “Make In India” policy on Indian customs duty has been significant. Several industries, including electronics, automobiles, and textiles, have seen an increase in custom duty rates to protect domestic manufacturers and promote self-reliance. This move has led to an increase in the cost of imported goods, making it more expensive for consumers to purchase foreign products.

Case Studies: Industries Affected by Changes in Custom Duty

Let’s delve into some real-world examples of how changes in custom duty have impacted industries in India. Take the automobile sector, for instance. Over the past two decades, shifts in custom duty rates on imported automotive parts have forced manufacturers to reconsider their supply chains and production costs.

Moving on to the electronics industry, fluctuating custom duties on components like semiconductors have influenced pricing strategies and market competitiveness for both domestic and international players. This has led to a dynamic landscape where companies must adapt swiftly to regulatory changes.

In the textile sector, alterations in custom duty rates on raw materials such as fabrics or dyes have directly affected production expenses and profit margins for businesses across the value chain. These adjustments require strategic planning and operational agility from industry stakeholders.

Each case study underscores the significant role that custom duty plays in shaping the competitive environment for various sectors within India’s economy. As we examine these instances, it becomes evident that staying informed about customs regulations is crucial for sustainable growth and success in today’s global marketplace

Furthermore, the COVID-19 pandemic highlighted the importance of self-reliance and reducing dependency on global supply chains. In response, the Indian government further hiked custom duty rates on certain products to promote local manufacturing and reduce reliance on imports.

In conclusion, the change in Indian custom duty trend over the last 20 years reflects the country’s shifting priorities in response to global economic trends and domestic policies. From liberalization to protectionism, the Indian government has used custom duty rates as a tool to promote economic growth, support domestic industries, and reduce dependency on imports. As we move forward, it will be interesting to see how these trends evolve and the impact they have on India’s position in the global economy.

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