Trade Deficit Inverted Duty Structure Offshore Manufacturing Domestic Value Addition

Published

As India’s trade portfolio expands to 15 operational FTAs covering 27 nations, economic analysts are raising critical concerns regarding structural challenges like rising trade deficits and low export-side utilization. Tariff asymmetries between India’s high Most Favoured Nation (MFN) duties and the near-zero rates of partner countries mean that foreign exporters gain massive cost advantages in the Indian market while Indian entities see minimal fresh access. Furthermore, these trade pacts are exacerbating inverted duty structures, where raw inputs carry high domestic tariffs but finished goods flow into India completely duty-free. This distortion provides an unintended incentive for commercial enterprises to shift high-value production clusters to countries like Vietnam or Thailand, effectively creating a “Make in ASEAN, Sell in India” phenomenon that actively undermines the core manufacturing milestones of the “Make in India” initiative.

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