Tariffs and Non-tariff Barriers

A significant aspect of the trade reforms of the 1990s was the reduction in the then prevailing very high import duties (over 300 percent in some cases). Since then, the peak rate has come down progressively from 150 percent in 199 1-92" to 25 percent in 2003-04 and 15 percent in 2005-06 in case of non-farm goods.

The government is committed to reducing tariffs to the levels comparable with those prevailing in East Asian countries in the near future. For instance, the weighted average import duties on various goods even though reduced from the earlier high levels are still higher in India from those of some of East Asian countries.

As against 28.5 percent of weighted average duty in India in 2000, China had 14.7 percent; Philippines, 3.8 percent; Thailand, 10.1 percent in the same year. More so, additional customs duty in India seems to continue on products that attract very low basic duty. But products covered by Information Technology Agreement attract only 4 percent tax.

The most common NTBs are the restrictions or prohibitions on imports maintained through import licensing requirements. Having been mostly justified on BOP basis, 80 percent of tariff lines were subject to some form of import licensing restrictions in mid-1990s. India started removing these restrictions since 1996 and virtually there are no such restrictions any more. As a result, the share of unrestricted product a under imports increased to more than 95 percent in 2003 from about 61 percent in 1996. The remaining 5 percent of tariff lines are permissible under Articles XX and XXI of GATT on the grounds of health, safety, moral conduct and essential security. More so, the proportion of canalised items in total imports in value terms declined from 27 percent to 19 percent between 1988-89  and 1997-98.