India mulls higher import duties to reduce reliance on China
What's the story
The Indian government is considering raising customs duties and offering targeted incentives for certain products. The move is aimed at reducing the merchandise trade deficit and dependence on single-country supply chains, The Economic Times reported. The proposed measures could be announced in the upcoming Union Budget, according to sources familiar with the matter.
Targeted approach
Focus on products with high import dependence
The government's strategy is focused on products with high import dependence from specific geographies. An official told The Economic Times, "There are certain goods in which we have high dependence on some geographies. We want to de-risk imports." The proposed approach includes providing fiscal support for select items while increasing import duties on others.
Product selection
List of 100 products identified for support
The government has identified around 100 products that could be eligible for fiscal support. These include engineering goods, steel products, machinery as well as consumer items like suitcases and flooring materials. Most of these items currently attract import duties in the range of 7.5-10%. The move comes amid a widening trade gap with imports outpacing exports significantly.
Trade imbalance
Trade gap widens as imports outpace exports
Data shows that India exported goods worth $292 billion between April and November of FY26, while imports stood at $515.2 billion during the same period. This has raised concerns within the government over external vulnerabilities. The industry has also been urged to reduce dependence on single-source supply chains and strengthen domestic sourcing. However, challenges remain due to low quality and high prices of certain locally produced goods compared to imports.
Import dependence
China dominates India's imports across categories
China continues to be a major supplier in several categories. In FY25, India imported $20.85 million worth of umbrellas, with $17.7 million coming from China alone. Spectacles and goggles worth about $114 million were imported in 2024-25, with nearly half sourced from China and a significant portion via Hong Kong; Italy was the third-largest supplier. China accounts for up to 90% of certain agricultural machinery imports into India.