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2 Feb 2026·Source: The Indian Express
3 min
EconomyNEWS

Customs Duty Cuts Boost Manufacturing, Trade, and Economic Growth

Government slashes customs duties to boost manufacturing and reduce import costs.

Customs Duty Cuts Boost Manufacturing, Trade, and Economic Growth

Photo by Mita 64

The government has slashed customs duties on various goods to boost manufacturing and reduce import costs. This move aims to make Indian products more competitive in the global market. The reduction in duties is expected to benefit several sectors, including electronics, chemicals, and textiles.

By lowering import costs, the government hopes to encourage domestic production and attract foreign investment. This initiative aligns with the broader goal of making India a manufacturing hub and promoting economic growth. The specific items and the extent of duty reductions have not been detailed in the article.

UPSC Exam Angles

1.

GS Paper 3 (Economy): Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

2.

Connects to the syllabus by addressing the impact of government policies on manufacturing and trade.

3.

Potential question types include statement-based questions on the impact of customs duty cuts and analytical questions on the role of customs duties in economic growth.

Visual Insights

Impact of Customs Duty Cuts

This mind map illustrates the interconnected effects of customs duty cuts on manufacturing, trade, and economic growth in India.

Customs Duty Cuts

  • ●Boost to Manufacturing
  • ●Trade Enhancement
  • ●Economic Growth
  • ●Beneficiary Sectors
More Information

Background

Customs duties have a long history, dating back to ancient civilizations where they were used to generate revenue and control trade. In India, customs duties were a significant source of income for empires like the Mauryas and the Mughals. The modern system of customs duties in India evolved during the British colonial period, with the introduction of various acts and regulations to manage import and export activities. These duties are now governed by the Customs Act, 1962. Over time, the role of customs duties has shifted from primarily revenue generation to also include protecting domestic industries and promoting economic growth. The General Agreement on Tariffs and Trade (GATT), and later the World Trade Organization (WTO), have played a crucial role in shaping global trade policies and reducing tariff barriers. India's commitment to WTO agreements has influenced its customs duty policies, balancing the need to protect domestic industries with the benefits of free trade. The legal framework for customs duties in India is primarily based on the Customs Act, 1962, which provides the legal basis for levying and collecting customs duties. The act has been amended several times to adapt to changing economic conditions and international trade agreements. The power to impose customs duties is derived from the Constitution of India, which empowers the government to regulate trade and commerce.

Latest Developments

In recent years, the government has been actively using customs duties as a tool to promote domestic manufacturing through initiatives like Make in India. The focus has been on reducing dependence on imports and encouraging local production. This involves calibrating customs duties on raw materials, intermediate goods, and finished products to create a favorable environment for domestic industries. There are ongoing debates about the optimal level of customs duties. Some argue for higher duties to protect domestic industries from foreign competition, while others advocate for lower duties to promote trade and reduce costs for consumers. Institutions like NITI Aayog play a key role in analyzing the impact of customs duties on various sectors and recommending policy changes. Looking ahead, the government is expected to continue using customs duties strategically to achieve its economic goals. This includes promoting exports, attracting foreign investment, and creating jobs. The upcoming milestones include further simplification of customs procedures and greater use of technology to improve efficiency. The government aims to make India a global manufacturing hub and boost economic growth through these measures.

Frequently Asked Questions

1. What is the main goal of the government's recent customs duty cuts?

The government aims to boost domestic manufacturing, reduce import costs, and make Indian products more competitive globally by cutting customs duties.

2. Which sectors are expected to benefit from the customs duty reductions?

Sectors like electronics, chemicals, and textiles are expected to benefit from the reduction in customs duties, as per the topic data.

3. How might these customs duty cuts impact foreign investment in India?

Lower import costs resulting from customs duty cuts are expected to attract foreign investment by making domestic production more appealing.

4. What is the historical context of customs duties in India?

Customs duties have a long history in India, dating back to ancient civilizations where they were used for revenue generation and trade control. The modern system evolved during British rule.

5. How do the current customs duty cuts align with the 'Make in India' initiative?

The customs duty cuts support the 'Make in India' initiative by reducing dependence on imports and encouraging local production.

6. What are the potential drawbacks of significantly reducing customs duties?

While the topic data focuses on benefits, significantly reducing customs duties *could* potentially harm some domestic industries if they cannot compete with cheaper imports. However, the article does not detail any drawbacks.

7. What is the UPSC relevance of customs duty?

The UPSC relevance is not explicitly mentioned in the topic data, but understanding customs duties is important for the Economy section in both Prelims and Mains.

8. What are the recent developments related to customs duties in India?

Recent developments include the government actively using customs duties to promote domestic manufacturing through initiatives like 'Make in India'.

9. What is the difference between customs duty and excise duty?

Customs duty is levied on goods imported from other countries, while excise duty is levied on goods manufactured within the country. This distinction is important for understanding government revenue sources.

10. For the UPSC Prelims, what is important to remember about this news?

For Prelims, focus on the purpose of the customs duty cuts (boosting manufacturing, reducing import costs), the sectors likely to benefit (electronics, chemicals, textiles), and the link to 'Make in India'.

Practice Questions (MCQs)

1. Consider the following statements regarding customs duties in India: 1. The Customs Act, 1962 provides the legal basis for levying and collecting customs duties. 2. The power to impose customs duties is derived from the Directive Principles of State Policy in the Constitution of India. 3. Customs duties are only used for revenue generation and not for protecting domestic industries. Which of the statements given above is/are correct?

  • A.1 only
  • B.2 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The Customs Act, 1962 provides the legal basis for levying and collecting customs duties in India. Statement 2 is INCORRECT: The power to impose customs duties is derived from the Constitution of India, specifically the provisions related to trade and commerce, not the Directive Principles of State Policy. Statement 3 is INCORRECT: Customs duties are used for both revenue generation and protecting domestic industries. The government's recent customs duty cuts aim to boost manufacturing and reduce import costs, indicating a strategic use beyond just revenue.

2. In the context of India's trade policy, what is the primary objective of reducing customs duties on various goods, as mentioned in the news?

  • A.To increase government revenue through higher import volumes
  • B.To make Indian products more competitive in the global market
  • C.To discourage foreign investment in domestic manufacturing
  • D.To solely benefit foreign exporters at the expense of local producers
Show Answer

Answer: B

The primary objective of reducing customs duties, as stated in the news, is to make Indian products more competitive in the global market. By lowering import costs, the government aims to encourage domestic production and attract foreign investment, aligning with the goal of making India a manufacturing hub and promoting economic growth. Options A, C, and D are contrary to the stated objectives.

3. Which of the following is NOT a likely outcome of the government's decision to slash customs duties on various goods?

  • A.Increased domestic production in sectors like electronics and chemicals
  • B.Reduced import costs for manufacturers
  • C.Decreased foreign investment due to lower profitability
  • D.Enhanced competitiveness of Indian products in the global market
Show Answer

Answer: C

Decreased foreign investment due to lower profitability is NOT a likely outcome. The reduction in customs duties is expected to attract foreign investment by making domestic production more competitive and reducing import costs. The other options (A, B, and D) are all likely positive outcomes of the policy.

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