India’s rising tariff walls may thwart India’s ambitions of replacing China in global value chains, research suggests
Coming on the back of a protracted trade war directed at China, the outbreak of the Coronavirus pandemic (Covid-19) has led many firms to reconsider their investments across Asian supply chains. For India, this raises the possibility of a silver lining amid the turmoil: that firms diversify their supply bases and invest in India.
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However, trade experts fear that India’s growing protectionist tendencies could get in the way. The past three Union budgets have seen India raise import barriers in a bid to protect domestic industries. The most recent union budget, announced on February 1, increased customs duty across a broad range of products accounting for over US$8 billion of India’s imports. While this is a small share (about 2%) of India’s overall imports, the protectionist barriers mark a clear embrace of import substitution. This hurts India’s objective of expanding exports through greater integration with cross-border production chains, which involve goods and services crossing borders several times while assembling a product.
Source: livemint
