Tariff Cuts To Be Calibrated, Sector-Specific: FM

New Delhi, Feb 26 (KNN) Union Finance Minister Nirmala Sitharaman on Wednesday said the government’s objective is to remove the fear of a ‘tariff wall’ around the Indian market, but emphasised that tariff rationalisation must be gradual and carefully calibrated.

Speaking at Business Standard Manthan 2026, she said tariff decisions in the Union Budget 2026–27 were taken after a detailed, sector-by-sector assessment of protection levels, duration, and domestic manufacturing capability.
She explained that industries receiving protection for 20–30 years without becoming globally competitive may be opened up to competition.

Economic Risks and Monsoon Watch

The minister identified global uncertainties and climate-related risks, including deficient or excessive monsoons, as downside threats to the economy.

She noted that while climate-related disruptions are difficult to manage, the government remains prepared and hopeful of a balanced monsoon season.

FDI, Domestic Capital and BITs

On foreign investments, Sitharaman said India seeks higher foreign direct investment (FDI), but growing domestic capital availability has diversified funding sources, reducing excessive dependence on global flows.

She added that global capital movements are influenced by external forces and uncertainty, requiring careful observation.

On Bilateral Investment Treaties (BITs), she informed some countries invest in India without demanding a BIT. Indian firms also invest abroad without BIT coverage. Investment decisions are not solely driven by treaty presence.

While clarifying she is not opposed to BITs, she noted that countries like China have attracted substantial investments even without BITs with many nations.

She also said post-pandemic foreign investment screening norms help identify ultimate beneficial ownership in cross-border flows, ensuring transparency.

Financial Sector Reform Roadmap

Sitharaman said an expert committee will recommend a reform roadmap for the financial sector to prepare banks for financing India’s journey toward becoming a developed economy.

She added that this is an opportune time to establish a high-level banking committee, given the strong performance of Indian banks over the last decade.

Centre–State Reform Funds and Political Economy

Referring to the Centre’s Special Assistance to States for Capital Investment (SASCI), a 50-year interest-free loan facility, the minister said some funds tied to reform conditions remain underutilised.

She suggested political considerations sometimes influence states’ decisions not to avail reform-linked funds, even when fiscal space is available.

Broader Takeaway

The minister’s remarks indicate a balanced policy stance of gradual tariff liberalisation, strengthening domestic competitiveness, diversifying funding sources, banking sector reforms for long-term growth and improved transparency in foreign capital flows.

(KNN Bureau)