As US president Donald Trump threatens to impose reciprocal tariffs on its trading partners, potentially upending global commerce, India has placed a significant emphasis on invigorating manufacturing and exports while also opening up the domestic market.

As part of the customs duty rejig, the government lowered import tax on a range of products such as motorcycles, both for engine capacities below 1,600cc and above and some passenger vehicles. It also cut duties on goods used in the space sector such as components of satellite vehicles and on parts of mobile phones and LCD TVs.

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The government’s decision to reduce import duty on two-wheelers comes in the backdrop of India seeking to ease tensions with the US over trade issues, particularly the looming threat of tariff hikes from president Donald Trump. The cuts coincide with Trump’s warnings, signalling India’s keenness to avert a trade row that could affect both the economies.

According to Budget documents, the import duty on motorcycles with an engine capacity below 1,600cc in completely built units (CBU) has been cut to 40% from 50%. In the case of higher displacement bikes, it has been cut to 30% from 50% when imported as CBU. There are reductions when bikes are imported in semi-knocked-down (SKD) and completely-knocked-down (CKD) versions.

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“While there is a restructure of the import duty in the case of cars where a reduction in basic customs duty has been balanced with increase in Agriculture and Infrastructure Development Cess, there is an effective import duty reduction in the case of motorcycles, for both above 1,600cc and below that,” said Abhishek Jain, indirect tax head & partner, KPMG.

President Trump had previously named Harley-Davidson motorcycles as a US brand which faced market access restriction due to high tariffs in India.

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For most automotive parts and vehicles, import duties haven’t really changed and the government just shifted some duties around, from basic customs duty to something called the agricultural infrastructure and development cess, according to Saurabh Agarwal, partner & Automotive Tax leader, EY.

“The only real duty cuts are on motorcycles (including in CKD and SKD form), some big passenger vehicles (including CKD and SKD form) and goods transportation vehicles. It can also be said to be a step by the Indian government to provide a level playing field to the foreign manufacturers by way of reducing tariff barrier in the sectors where India has a strong supply chain,” said Agarwal.

Concerned over the widening trade deficit, finance minister Nirmala Sitharaman, in her Budget speech, unveiled a comprehensive strategy to strengthen India’s export sector and ensure the country’s integration into global supply chains.

The budget announced measures to fire up India’s exports.

“The government will establish an Export Promotion Mission with sectoral and ministerial targets. The mission will be driven jointly by the ministries of commerce, MSME, and finance to streamline export-related initiatives and enhance market access for Indian products,” said Sitharaman.

The mission will also focus on facilitating easier access to export credit, cross-border factoring support, and assisting MSMEs in tackling non-tariff barriers in overseas markets, said Sitharaman.

This focus on exports comes at a time when India is aiming to reduce its trade deficit, which has been exacerbated by global challenges, including the ongoing trade tensions from the Trump administration’s tariff policies.

However, with exports already crossing $600 billion by December 2024, India is optimistic about meeting its $800 billion export target for the fiscal year.

India’s merchandise trade deficit eased to a three-month low of $21.94 billion in December, supported by higher exports, according to commerce ministry data. Merchandise exports for April-December 2024 reached $321.71 billion, a 1.6% increase from the same period in 2023.

The government has set an ambitious goal of achieving $2 trillion in exports by 2030, signalling a bold push to expand India’s presence in global markets.

One of the major initiatives under this strategy is the establishment of a digital public trade infrastructure known as Bharat Trade Net (BTN). The BTN is designed to streamline trade operations by reducing logistical bottlenecks and simplifying documentation processes. It will be aligned with international trade practices, facilitating smoother and more efficient cross-border trade.

While this move was hailed as a positive step, trade expert Ajay Shrivastava, founder of the Global Trade Research Initiative (GTRI), suggested that high-level intervention will be necessary for its success. Shrivastava, a former Indian Trade Service officer, stressed that similar digital infrastructure has proven effective in other countries, but without strong leadership from the top, departmental priorities could slow down its progress.

Currently, Indian exporters deal with multiple government agencies separately, creating unnecessary delays. A unified trade network for compliance processes would enable businesses to file all necessary documents in one place. This could potentially allow 100,000 small businesses to start exporting within a year, Shrivastava added.

In addition to improving trade infrastructure, the government has committed to supporting domestic manufacturing to enhance global competitiveness.

“Facilitation groups, comprising senior officers and industry representatives, will be formed for select products and supply chains,” the FM said.

This, in turn, will open up significant opportunities in emerging sectors like Industry 4.0, with a focus on leveraging India’s skilled youth for the development of the electronics and technology sectors.

The FM also announced a revision of the Bilateral Investment Treaty (BIT) framework to make it more investor-friendly, aiming to attract greater foreign investment.

The government is also working to build a national framework to promote the establishment of Global Capability Centres (GCCs) in tier-2 cities.

“This framework will suggest measures for enhancing availability of talent and infrastructure, building-byelaw reforms, and mechanisms for collaboration with industry,” the FM said.

Further, the Budget outlined plans to upgrade infrastructure and warehousing for air cargo, with a special focus on high-value, perishable goods like horticultural produce. Streamlining cargo screening and customs protocols is expected to enhance the efficiency and user-friendliness of these processes, reducing delays and improving the country’s export logistics network.

Earlier, Mint reported on 13 November that the commerce ministry is pitching for air cargo to ship perishable products that rely on swift delivery, as disruptions in the Red Sea trade route have increased freight costs.