Fix a Sunset Date

Context:  Recently, The government decided to bring a sunset clause on import tariffs and other barriers in recent years to protect domestic industries.

Rationale for increasing tariffs

• Increase in output and employment: Higher the prices of the imported goods, more the people will move towards domestic products, helping in the growth of economy.

• Attracts foreign investor: This would also incentivise foreign producers to shift production to India. 

Issues with increasing tariffs and import barriers:

• Affects competitiveness and potential growth: High tariffs tend to increase costs and affect the overall competitiveness of the economy.

• Higher tariff impacts exports: While the overall exports have grown at a rate for 13.4% between 1995 and 2018, higher tariffs now will restrict India’s ambition of entering the global value chains.

Biggest policy failing in India with respect to exports: has been inability to take advantage of its labour force to increase exports.( India’s low-skill exports are about $60 billion less annually than they should be).

Advantages of introducing a sunset date for tariff protection

• Manufactures become more competitive: Because they would realise that after a specific date, they would face more competition

• International competition will help in increased efficiency and growth 

• Consumers can benefit from an open economy: 

Conclusion: Policy makers should put an end date to tariff protection for the overall benefit of the economy.