Customs Tariff Reform

This note argues that India?s tariff rates be brought down to globally competitive levels and proposes a uniform structure of tariffs. The reduction of duties will be accompanied by a real depreciation of the rupee relative to the exchange rate in the base line scenario (of no tariff reductions). This will substantially offset the direct effect of tariff reduction on industrial goods. The easy availability of inputs at low tariff rates and the pressure to improve productivity should take care of the remaining gap. No significant industrial product line is likely to go out of business, though intra-industry trade will increase even more rapidly.