India slaps 12% tariff to shield steel industry

India plans to impose a 12 percent "safeguard duty" on certain steel products for 200 days to protect its domestic industry from "serious injury" caused by a spike in imports.

While the move has been welcomed by local manufacturers, it has raised concerns among downstream industries over rising costs.

The decision comes as India navigates the fallout of sweeping United States tariffs on steel and aluminum. Experts have urged closer economic cooperation between India and China to counterbalance the effects of US protectionism.

In a notice published on Tuesday, the Directorate General of Trade Remedies, an investigative arm of India's Ministry of Commerce and Industry, said a 12 percent provisional safeguard duty was deemed "appropriate to eliminate the serious injury and threat" to the domestic industry.

The agency has invited comments on its findings within 30 days, after which an oral hearing will be held. Thereafter, the final decision will be taken.

Abhishek Dayal, additional director-general of the commerce ministry, said: "This is a recommendation. Federal Finance Ministry will take the final decision in this regard. It will take a few days to come into effect."

T.V. Narendran, CEO and managing director of Tata Steel, one of India's top steel manufacturers, backed the proposed new import levy, saying, "We welcome the decision and appreciate the government's support."

A.S. Firoz, former chief economist at the Economic Research Unit of India's Ministry of Steel, said the proposed safeguard duty will benefit domestic steel producers but will also drive up costs for user industries.

Sectors such as automobile, shipbuilding and construction will suffer if the new import duty comes into effect, Firoz said.

Guo Xuetang, director of the Research Centre for South Asia and Indian Ocean Studies at Shanghai University of International Business and Economics, said imposing the 12 percent tariff is India's natural response to US protectionism.

Through this action, Indian Prime Minister Narendra Modi hopes to enhance the competitiveness of domestic companies while signaling to the world that the country can protect its industries, Guo said.

While some think the tariff may affect Chinese steel exports to India, Guo said he believes this is unlikely as India still needs high-quality, cost-effective Chinese steel for infrastructure projects, such as building bridges.

"I don't think the tariff imposed will slow down China's economic growth or hurt China-India collaboration in any way," Guo said.

"But from the industry and trade perspective, the two sides will need to communicate more with each other."

Karori Singh, former director and an emeritus fellow of the South Asia Study Centre at the University of Rajasthan in India, said that amid US protectionism, India and China must collaborate on mutually helpful policies and take a joint stand on corrections to trade distortions resulting from the policies of developed countries such as the US.

Swaran Singh, a professor of international relations at Jawaharlal Nehru University in New Delhi, said that as India and China have both become targets of unprecedented US tariff hikes, it creates an opportunity for the two nations to cooperate more on the economic front.

This view was echoed by Pushan Dutt, a professor of economics and political science at the INSEAD business school in Singapore.

Multiple avenues

"There are multiple avenues for fruitful cooperation — not just reducing mutual trade barriers, but promoting bilateral investments, collaborating in technologies and knowledge, and even jointly developing infrastructure projects," Dutt said.

"They should strengthen cooperation through forums such as BRICS, the G20, and align on WTO reforms."

Sudheendra Kulkarni, who served as an aide to former Indian prime minister Atal Bihari Vajpayee, said Washington's tariff war has convinced India, China, Mexico, Canada and the European Union that they should reduce their dependence on the US and enhance cooperation with other trading partners.

In this context, India and China should explore the opportunity and seek further cooperative relationships, Kulkarni said.

Enhanced trade collaboration between India and China could yield considerable ramifications on a global scale, owing to their participation in multilateral entities such as BRICS, the Shanghai Cooperation Organization, and the G20, said Biswajit Dhar, a former professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University.

"India and China should coordinate their efforts and get other BRICS countries together to counter this hegemonic tariff — because all of us are going to face the same music," Dhar said.

Aparajit Chakraborty is a freelance journalist for China Daily.

Contact the writers at vivienxu@chinadailyhk.com