Customs rejig must resolve inverted duty, supply chain issues: Virmani

AHEAD OF THE Union Budget for FY27 and an expected overhaul of the customs duty regime, economist and Niti Aayog member Arvind Virmani has underlined the need for India to address inverted duty structures, ease supply chains and facilitate labour-intensive stages of production to enhance the competitiveness of the Indian economy.

- PRASANTA SAHU

India's weighted average customs duty currently stands at around 12%, significantly higher than the roughly 5% average among the world's top economies. This gap, Virmani argued, places Indian manufacturers and exporters at a disadvantage in several sectors. In his view, customs reform must focus not merely on lowering tariffs, but on rationalising the structure to support domestic production, exports and integration into global value chains.

While talking to FE, Virmani said India 's strategy to narrow this gap is increasingly centred on free trade agreements (FTAs) with high-income economies. Such agreements, he noted, can reduce effective tariff rates to well below 5%, without resorting to blunt, across-the-board tariff cuts. Beyond tariffs, he emphasised the broader objectives of improving quality, productivity and wages, supported by complementary reforms in logistics, standards and supply chain efficiency to fully realise the gains from customs reform.