High Tariffs Identified As Key Factor Behind Weak Exports, Says GTRI Report

New Delhi, Jan 2 (KNN) GTRI's report on Monday highlighted that India's subdued export performance can be attributed to elevated tariffs within the country and comparatively lower tariffs in its Free Trade Agreement (FTA) partner nations.

According to the report, numerous Indian businesses opt not to leverage the FTA pathway when import duties are minimal, as the associated compliance costs do not outweigh the tariff benefits. For instance, many imports from India's FTA partners are subject to zero or low Most Favored Nation (MFN) duties.

In contrast, India imposes higher import duties, and the elimination of these duties under FTAs provides a competitive price advantage to products originating from FTA partner countries, as per GTRI's findings.

The tariff disparity stands out as one of the reasons why India's three significant Free Trade Agreements (FTAs) with ASEAN, South Korea, and Japan faced challenges, leading to a substantial increase in India's merchandise trade deficit with these partners compared to its global trade deficit.

The report specified that the deficits surged by 302.9 per cent with ASEAN, 164.1 per cent with South Korea, and 138.2 per cent with Japan, in contrast to an 81.2 per cent increase in the global deficit. This assessment is based on data spanning the pre-FTA period (2007-09) and recent trade data (2020-22).

Furthermore, India's exports to these FTA partners exhibited a slower growth rate compared to imports. For instance, with ASEAN, exports grew by 123.9 per cent, while imports surged by 175.7 per cent. Similarly, with Japan, exports increased by 56.4 per cent, and imports rose by 98.5 per cent. In the case of South Korea, exports grew by 89.1 per cent, while imports soared by 127.3 per cent, as highlighted in the report.

(KNN Bureau)