Market access worry prompts industry's zero-for-zero pitch

THE US GOVERNMENT'S reciprocal tariff threat seems to have finally prompted Indian industry to give up on its craving for protection.

- PRIYANSH VERMA & SANDIP DAS

A range of sectors from gems & jewellery and pharmaceuticals to emerging ones like electronics and automobiles are pitching for a reduction — in some cases even elimination — of import tariffs, as a way to mitigate the potential adverse impact of the US move.

Industry executives and experts FE spoke to, advocate a nuanced approach on the issue. This is because Indian industries and other stakeholders including farmers and livestock breeders are at disparate levels of preparedness when it comes to facing unhindered competition from the US exporters.

Besides, the US is the largest foreign market for Indian producers of goods and services, accounting for 18% of its merchandise exports. Since the economic ties between the two countries are so varied, and their strategic relations at high stakes, any response to US President Donald Trump's move must be carefully thought out, they say. How the Trump administration would structure its so-called "fair and reciprocal" plan is yet to be spelt out. A key question is whether the US plan is for country-level reciprocity or a product-level approach. In the latter case, Goldman Sachs reckons, the tariff differential (or adjustments to be made by India in its customs duties) will be much larger at 11.5 percentage points (pp), versus weighted average tariff gap of 6.5 pp under a country-wide approach.

GTRI ESTIMATES THE countrylevel tariff difference at 4.9%.If the US chooses to impose additional tariffs to neutralise the gap, it would be 3.3% on industrial goods, and around 32% on farm goods. One proposal is for India to offer zero-for-zero tariffs for a slew of tariff lines where India can eliminate import taxes without causing big harm to the domestic industries and agriculture. This would help reduce the tariff differential with the US, but its acceptance by the US is doubtful.