India Defends Tariff Policy, Sitharaman Emphasizes Reforms

In a vehement response to constant criticism by other countries, Union Finance Minister Nirmala Sitharaman has clarified that India is not a protectionist economy and original tariff rates are really lower than it is being assumed. In a meeting addressed at the Exim Bank Trade Conclave 2025, Sitharaman rejected the story peddled, particularly U.S. policy circles, of India being described as the tariff king.

The finance minister reasoned that the impression is created by the Indian system of legislation that obliges it to follow the process that requires tariff ceilings to be approved in the parliament first. These are the higher bands which are hardly put into practice but thought to be the tariffs with force.

A large number of international observers still assume that India is functioning at its maximum allowable tariff levels. But the fact is that the effective tariff is implemented very low. What they quote are mere authorisation ceilings, not the real time duty slabs, said Sitharaman in her speech.

Pointing to some of the current reforms, Sitharaman said that India has deliberately been rationalising tariffs in order to become competitive in international trade and to promote internal value addition. She also disclosed how in this year Union Budget, seven more tariff rates have been eliminated so that less number of rates are left to make the structure rather simple containing only eight rates.

She said that they are in tune with Indian intention of lowering trade restrictions and offer the same level of playing field to domestic manufacturers and exporters. The reformist view further seeks to establish a sound predictable and a business friendly environment in trade.

Key Highlights of Sitharaman’s Address:

Effective tariff levels are well below the ceiling authorised by Parliament.
Seven tariff slabs were removed in Budget 2025, leaving only eight.
Focus is on supporting manufacturing, boosting exports, and easing trade.
Emphasis on trade facilitation as part of broader economic reforms.

These initiatives will be part of a wider Indian move to insert itself more solidly into the global production chain, as well as international investment. The government is trying to recreate India as a viable and stable trade partner by simplification and cutting down tariffs.

Sitharaman also provided an update on the trade talks that are underway against major economies of the world as well as with the United States, the United Kingdom, and European Union. Talks according to her are going on in full swing and will soon lead to actual agreements in the not so distant future.

Her observation seems to be well timed since trade policy continues to take centre stage in bilateral and multilateral interactions in India. The FTAs between India and UK or EU have been pending over a long time, and one of the most disputable aspects was tariff frameworks.

Speaking of the interests of the domestic exporters, the finance minister understood the difficult environment on the international scene, yet good news is that Indian businesses are resilient.

“Exporters are not just navigating headwinds, they’re outperforming expectations. They are actually going against the tide and succeeding,” she added. She guaranteed the government is determined to grant institutional and policy support to export sector namely during periods of geopolitical volatility, as well as international demand changes.

Broader Economic Context

Tariff reform by India is an auspicious moment when world economies are re-adjusting their trade policies to counter inflationary pressures, supply chain dynamics and realignment of geopolitical affiliations. The decision to have lower effective tariffs and still having the flexibility of a parliament is a mutual goal of the country, want to have strategic autonomy and not repellent to international partners.

Furthermore, the decision can also be interpreted as a clear indicator in view of potential conclusions of the FTAs round: India is ready to trade off to reach an acceptable common ground, yet not to the detriment of national economic interests.

It is a reform-minded stance, but Sitharaman mentioned that as India takes its place in global economics she aims at striking a balance between protectionism and liberalism of the global marketplace.