Arvind Panagariya, Chairman of the 16th Finance Commission and former Vice Chairman at NITI Aayog, believes that reducing import duties on automobiles may not necessarily be a disadvantage for India.
He argued that protecting the domestic auto sector with high tariffs ultimately comes at the expense of Indian consumers, who pay significantly more for global models.
“For a car like Camry, consumers in India pay probably one and a half times the price that prevails in the global marketplace. If you buy the same car in the United States or Japan, it will be about one-third less than what customers in India are paying,” he said.
India’s auto industry, he noted, has had protection for decades, and lowering tariffs could encourage greater competition, making the sector more efficient. “We also need to make our car industry more competitive, more productive, more efficient.”
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If implemented, the tariff cut could benefit companies like Tesla, which has been lobbying for reduced import duties to enter the Indian market.
However, it may also pose challenges for domestic automakers like Mahindra & Mahindra and Tata Motors, which would face increased competition from global players.
In return for lower tariffs on cars, India could negotiate better terms on key export sectors such as textiles and clothing, benefiting from a more liberalised trade environment.
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Panagariya pointed out that an ideal scenario would involve both nations lowering their tariffs, facilitating better market access for each other’s exports. However, he also cautioned that if an agreement is not reached, both countries could end up imposing higher tariffs, leading to a counterproductive trade war.
For the full interview, watch the accompanying video
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