Finance Minister Nirmala Sitharaman on Thursday said the government aims to complete customs tariff rationalisation by the 2027–28 Budget, with a reduction in the number of slabs to single digits.
“At present, only around 13 (slabs) remain. Ultimately, the number of tariff slabs will come down to single digits. The work is continuing,” she said, adding that rationalising Customs tariff is progressing well.
The statement comes in the wake of a gradual reduction in India’s common most favoured nation (MFN) tariffs across nearly 12,400 tariff lines in recent years, reversing an escalation witnessed during a brief period since 2016. According to analysts, the simple average tariff increased from a low of 13.4% in 2026 to 17% in 2023, before falling to a little over 16% in 2024 and to the current level of 15% or thereabouts.
“Perhaps by the 2027–28 Budget, I will be able to say that, except for a few items, the rationalisation is complete,” the minister said during an interaction after delivering the CD Deshmukh Memorial Lecture organised by the National Council of Applied Economic Research (NCAER).
Experts, however, pointed out that while the tariff slabs have indeed reduced in recent years, compolexities persist due to specific (volume-based) duties on a clutch of items including fabrics, and mixed tariffs – ad valorem and specific duty combination– in scores of other items. Also, the existence of the agruculture infrastructure cess complicates the tariff slabs to a great extent. Removal of inverted duty conditions from various product groups is also an ongoing but unfinished agenda.
The Union Budget FY27 advanced Customs slabs rationalisation by cutting duties on items imported for personal use from 20% to 10%, zero-rating basic customs duty on 17 critical cancer and rare disease medicines, and expanding duty-free caps for export inputs. These measures, however, fell short of expecations, as exeperts were pitching for a more comprehenesive overhaul.
Even as MFN tariffs are being reduced, and slabs restructured, the flurry of bilateral free trade pacts have effectively India’s actual import tariffs to a large extent. With FTAs with the European Union taking effect by year-end, and a long-delayed pact with the US likely to take place, imports under preferential routes may rise to more than 50% of total inward shipments in the next one year or so.
In her lecture, Sitharaman said India’s goal of becoming a developed nation by 2047 was not a new ambition but a restoration of its historical position. Backing her argument with historical data, Sitharaman cited estimates by economic historian Angus Maddison, saying India accounted for about one-third of global GDP (PPP) at the beginning of the Common Era and nearly a quarter in 1500 CE.
Its share declined to 16% by 1820, 12% by 1870 and around 4% by 1950, before falling to below 3% in the early 1970s. Today, India accounts for about 8.5% of global GDP (PPP). “Viksit Bharat, therefore, is not an unprecedented ambition. In a way, it is a restoration,” Sitharaman said.
“India’s poverty was never our steady-state. It was manufactured after centuries of invasions and colonialism, and we then prolonged it ourselves for four decades after we were free to stop when we attained independence,” she said.
Tracing India’s economic journey since Independence, Sitharaman said the country inherited Partition, mass poverty, food insecurity and a weak industrial base. While acknowledging the institution-building efforts that led to the creation of organisations such as ISRO, BARC, BHEL and the IITs, she argued that the Licence-Quota-Permit Raj stifled enterprise by concentrating economic decision-making within the state.
“The Licence-Quota-Permit Raj concentrated discretionary authority within the administrative machinery of the State, and investment decisions moved from the market to the bureaucrats and political executives,” she said.
Calling the 1991 liberalisation a watershed moment, Sitharaman said the reforms were “born of compulsion rather than choice” because they were undertaken amid a balance of payments crisis.
She said reforms since 2014—including financial inclusion, the JAM trinity, inflation targeting, the Insolvency and Bankruptcy Code, GST and Digital Public Infrastructure—had strengthened India’s economic foundations, helping the country withstand successive global shocks. “Yet India did not allow these shocks to become an excuse for stagnation,” she said.