The Indian government’s move to tweak customs duties is not a knee-jerk response to US President Donald Trump’s latest tariff threats, finance minister Nirmala Sitharaman told the Rajya Sabha on March 27. Instead, she said, this rationalisation process has been in the works since 2023 and is part of a broader plan to make manufacturing in India cheaper and boost exports.
Speaking during a discussion on the Finance Bill 2025 and the Appropriation (No. 3) Bill, 2025, Sitharaman brushed off Opposition claims that India is lowering import taxes due to pressure from Washington. “Some members said this is because of Trump’s tariff announcements. No. We’ve been doing this since 2023, and it’s a consistent, year-on-year effort,” she said.
The Rajya Sabha later returned both bills to the Lok Sabha, which had already passed them on March 25. With Presidential approval expected soon, the proposals will become law.
In simple terms, the government is trimming or removing certain import taxes—known as customs duties—on a range of items. The idea is to help local manufacturers who rely on imported raw materials or components. It’s also aimed at making Indian-made goods more competitive in global markets.
For example, in the budget for the financial year 2025–26 (presented on February 1), customs duties were slashed on items like lifesaving drugs, textile machines, leather materials, and critical minerals. This continued an exercise that began in the July 2024 budget, where multiple duty rates were already being rationalised.
According to Sitharaman, the number of different customs tariff rates for industrial goods has now been reduced from 21 to 8. That’s been done in two stages—one in July 2024 and the second in this year’s budget. The thinking behind it: fewer tax rates make life easier for businesses, especially smaller ones.
A big push has also been given to local production of electric vehicle (EV) and mobile phone batteries. The Finance Bill 2025 adds 35 capital goods for EV battery production and 28 for mobile battery production to the exempted list.
On top of that, the government has fully removed basic customs duty (BCD) on cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 more critical minerals. These follow exemptions for 25 critical minerals already announced in the previous budget.
Not everyone is convinced. Former finance minister and Congress MP P Chidambaram questioned the timing of the move, linking it to the ongoing tariff threats from Trump. He warned that a tariff war could spell trouble for India’s exports, foreign investments, inflation, and the value of the rupee.
Chidambaram also claimed that the recent duty cuts on items like automobiles might be a response to US pressure—a claim Sitharaman firmly denied.
