Union Budget 2025 Proposes Rationalization of Customs Tariff Structure

 Key Changes to Customs Tariffs Announced:

• The total number of customs tariff rates has been reduced to 8, including the zero rates, down from 15 previously.
• A proposal has been made to impose no more than one cess or surcharge, exempting the Social Welfare Surcharge on 82 tariff lines that are already subject to a cess.
• Appropriate cesses will be applied to maintain effective duty incidence, with exceptions for a few items.

Significance: In the midst of the ongoing tariff and trade disputes, these changes highlight India's strategy to protect domestic industries while facilitating essential imports. Recently, the U.S. President sparked a trade war by imposing extensive tariffs on China, prompting retaliatory actions. India's tariff rationalization also serves to counter the perception that it has excessively high tariffs, which has been a point of contention for American businesses.

What is a Trade War?

A trade war refers to economic conflicts where countries impose tariffs or trade barriers against each other, disrupting global supply chains, increasing costs, and slowing economic growth.

How India is Shielding Its Economy from the Impact of Trade Wars:

• Strengthening Domestic Manufacturing: Initiatives such as the Production-Linked Incentive (PLI) Scheme and Make in India program.
• Diversifying Trade Partners: New trade agreements with countries like the UAE, Australia, and the EU.
• Other Measures: Reducing dependence on China through the China+1 strategy and promoting the internationalization of the Rupee.

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