Introduction

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 IMPORTANCE
‡ Tariffs are duties or list of that the
government puts on exports and imports.
‡ Tariffs are important because they help to
regulate the products flowing in and out of
a country.
‡ To protect fledgling domestic industries
from foreign competition.
‡ To protect aging and inefficient domestic
industries from foreign competition.
 Areas of concern
‡ India has reduced tariffs to bring them to
bound levels. Even lower for a large number
of commodities as part of the reforms
process. Now, India committed to reduce
tariffs to bring in line with South East Asian
countries by 2007. We are not in a position to
reduce tariffs substantially to the extent
suggested by developed countries since
‡ Customs duties important source of revenue
for developing countries like India.
‡ The industrial sector faces several
constraints-some protection warranted for
specific industries.
 Tariff Structure in India
‡ Given importance attached to reduction of tariffs,
we look at tariff structure in India and alternative
strategy for tariff negotiations.
‡ Tariff structure in India highly complex in early
1990s. With initiation of reforms, substantial
reduction in customs duty rates. Simple average
duty rates declined from 128% in 1991-92 to
22.4% as per interim budget for the year 2004-
05. Weighted average duty rates declined from
72.5% to 18.2% during this period, as in table.
 Tariff Structure in India(continued)
‡ While average duty rates have declined,
still large number of tariff rates prevalent
ranging from zero per cent to over 150%
during 2004-05.
‡ Co-efficient of variation (CV) around
average duty rates quite high.
 Types of Tariffs
‡ Specific Tariff
g A tariff specified as an amount of money per unit of
the good sold. (Easy to calculate, but does not
adjust to price changes.)
‡ Ad Valorem Tariff
g A tariff calculated as a percentage of the value of
the good or service. (More difficult to calculate.)
‡ Combination Tariff
g A tariff that combines an ad valorem tariff and a
specific tariff.
 Six Types of Non-Tariff Barriers

(1) Specific Limitations on Trade:

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(2) Customs and Administrative Entry Procedures:

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 Six Types of Non-Tariff Barriers

(3) Standards:
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(4) Government Participation in Trade:

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 Six Types of Non-Tariff Barriers

(5) Charges on imports:
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‡ Tariffs are a boon to domestic producers who
now face
reduced competition in their home market.
‡ The reduced competition causes prices to rise.
The sales of domestic producers should also
rise, all else being equal.
‡ The increased
production and price causes domestic producers
to hire more workers which causes
consumer spending to rise.
‡ The tariffs also increase government revenues
that can be used to the benefit of the economy.
 The Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Increase:

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 The Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Weaken:

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 The Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Restrict:

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The
 

 aims at doubling India's
export and generate additional employment
complimenting the stupendous growth of Indian
economy. The export tariffs in India is formulated
complimenting the export import policy of India which
again forms a part of the India's foreign trade policy.
The current export tariffs in India as per the EXIM
policy of India covers exports tariff rates for different
goods and services. The export tariffs in India as per
the Indian classification on tariff items which strictly
conforms to the "Harmonized Commodity Description
and Coding System".
 

 !|
The Indian export tariff saw a quantum
increment of Indian exports to Pakistan, UAE
and Italy in the first quarter of the current fiscal
year. Today, India ranks second in the
manufacture of small passenger car segment. It
is the worlds largest producer of generic
pharmaceutical and its Information Technology
sector is registering three figure growth
consistently. As a result of which India has
become the global export hub for goods and
services.
 Tariff Structure and
Imports(continued)
‡ Looking at import elasticities, found elasticity
less than (-)1.0 for 13 commodity groups out
of 99. This suggests that reduction in tariff
would result in higher percentage increase in
import ratio for these commodities.
‡ These items included animal/vegetable fat,
sugars, cocoa, vegetable and fruit
preparations, tobacco items, carpets and
textile, floor coverings, apparels and clothing,
human hair, feathers, ships and boats,
furniture, beddings, toys, sports items
‡ Other sectors¶ elasticity found to be between
(-)1.0 and zero and even positive for few.
 Some Final Observations
‡ Large tariff reductions of essential import
items like cereals, dairy products, edible oils
and other agricultural products with low
elasticity would benefit the consumers but
would be unacceptable on considerations of
number of people dependent on these items
for their livelihood and implications on
domestic production. These sensitive items
are also heavily subsidised by DCs.
‡ On the other hand, drastic tariff reductions on
items with high import elasticity could lead to
substantial surge in imports and affect the
domestic economy adversely.
 Some Final Observations (continued)

‡ It is imperative that tariff rates need to be

rationalised and more importantly made
more uniform and transparent.
‡ While undertaking reduction commitments,
need to carefully identify sectors that could
be subjected to greater tariff reductions
than others.
 Some Final Observations (continued)

‡ At the same time, items of export interest

with high import content need separate
treatment.
‡ Delicate balance of various considerations
required to determine tariff reductions
such that have minimal detrimental impact
on economy.
| |




PROJECT BY:

PIYUSH RATHOD -62

HARSHIT BAFNA -06