As Budget 2026 approaches, Finance Minister Nirmala Sitharaman has signalled continued efforts to clean up India’s fragmented tariff structure. This move would be much needed! While India has 22 Basic Customs Duty (BCD) rates, hidden cesses push the effective number of rates to nearly double those of China and Vietnam. Why does this matter? One of the major barriers to India’s export growth is a literal one: customs clearance, which is much slower than in competing countries. According to the World Bank Enterprise Surveys, customs import clearances take 3-4 times longer in India than in China and Vietnam, limiting our trade potential.

Fewer rates would mean clearer rules, fewer customs delays and more predictable outcomes which build investor confidence. For manufacturers choosing between India, China, or Vietnam, India’s complex tariff structure adds compliance costs, delays and uncertainty.

Currently, even closely related products face drastically different duties: watch dials carry a 5.5% duty rate, while clock dials face 11%. Across categories, there are nearly 160 such instances of inconsistent rates. Over time, these distortions have created confusion for importers and led to costly, prolonged litigation cases.

Building on last year’s tariff rationalisation efforts, an effective clean-up that reduces rates to 2–3 slabs could address these challenges head on. More importantly, a simpler, transparent regime would boost confidence in India’s trade policy and position the country as a predictable, globally competitive manufacturing hub.