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Tariff uncertainty

Tinkering with rates will put off investment and hurt exports

Topics
import tariffs | trade protectionism | Budget 2021

Business Standard Editorial Comment  |  New Delhi 



Another has deepened the turn towards protectionism, which began a few years ago. Union Finance Minister said in her Budget speech that the Customs duty policy “should have the twin objectives of promoting domestic and helping India get on to the global value chain”. But these twin objectives run directly counter to each other. Promoting domestic through trade policy inevitably leads to dissociation from the modern system of just-in-time manufacturing, which demands flexibility and access. In spite of the ample evidence that these two objectives cannot be simultaneously achieved, the finance ministry persists in trying to tinker with tariffs in a manner that dis-incentivises domestic productivity, leads to enhanced lobbying by interest groups, harms consumers, and creates overall uncertainty for investment.

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First Published: Wed, February 03 2021. 22:32 IST

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