India’s high tariffs, import regime, digital trade restrictions are barriers to trade: US report

India maintains high applied tariffs on a wide range of goods, including alcoholic beverages, automobiles, motorcycles, vegetable oils, apples, corn, natural rubber, walnuts, almonds and drug formulations that are significant barriers to trade, according to a US government report.

New Delhi also maintains various forms of non-tariff barriers such as import ban on items like tallow and fat, requirement of non-automatic import licenses for items such as certain IT products and pharmaceuticals and allowing certain imports only by government trading monopolies subject to cabinet approval regarding import timing and quantity, the 2025 National Trade Estimate (NTE) Report released by the US Trade Representative (USTR) pointed out.

These observations are important especially because the US is trying to push India to lower both its tariff and non-tariff barriers as part of the India-US bilateral trade agreement (BTA) being negotiated.

Other areas of concern highlighted in the report relate to digital trade & data localisation, alleged favouring of domestic suppliers in electronic payment services, issuance of various quality control orders, mandatory domestic testing and certification requirement for equipment, sanitary & phytosanitary barriers, stringent requirements for dairy imports, government procurement policy, intellectual property rules and limitation on foreign investment in services.

“While the US continues to pressure India to amend its trade policies to serve American commercial interests, India must firmly assess each demand through the lens of its own national priorities, development goals, and cultural values,” pointed out Ajay Srivastava from the Global Trade and Research Initiative.

Many of the proposed changes—in areas like agriculture, digital governance, and public health—pose serious risks to India’s ability to protect its small farmers, maintain food safety, uphold deeply rooted social norms, and secure its digital future, Srivastava added.

“India’s WTO bound tariff rates on agricultural products are among the highest in the world, averaging 113.1 percent and ranging as high as 300 percent. Given the large disparity between WTO bound and applied rates, India has considerable flexibility to change tariff rates for both agricultural and non-agricultural products at any time, creating tremendous uncertainty for US workers, farmers, ranchers, and exporters,” the report noted.

The requirement of a Chartered Engineer’s certificate to import both refurbished goods and used manufactured goods was flagged as an irritant. “In the case of refurbished medical devices, the absence of guidelines to issue licenses and clear import processes under the medical device rules has historically caused delays and uncertainty, limiting US exports. US companies report that they have been unable to import their devices into India since April 2024, when India’s regulator suspended approvals of existing and new applications for import licenses,” it said.

The report also mentioned the import licensing requirement for computers and laptops and said there were concerns over lack of prior stakeholder consultations. “The US continues to monitor the situation and engage with India on these concerns,” it said.

On services, the report pointed out that foreign investment in certain major sectors, including financial services and retail, is subject to limitations on foreign equity, and foreign participation in professional services is significantly restricted. “In addition, barriers to digital trade and electronic commerce, such as those imposed on electronic payment providers, have secondary effects on a wide variety of services,” it said.

The US is also unhappy about the RBI requirement that all payment service suppliers and banks operating in India store all information related to electronic payments by Indian citizens on servers located in India. “Foreign firms assert that the data storage requirement hampers the ability of service suppliers to detect fraud and ensure the security of their global networks,” the report said.

America medical equipment companies’ complaint about National Pharmaceutical Pricing Authority (NPPA) caps on prices of coronary stents and knee implants also found a mention with the report highlighting that price controls did not increase in line with inflation and did not differentiate based on production costs and innovation. 

The report stressed on the need for creating stronger IP protection and enforcement in India and criticised the country’s lack of an over-arching government procurement policy.

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