Tax relief, import curbs can shield India from war crisis: Report
India needs to undertake measures such as tax moderation to boost export competitiveness, targeted import curbs on non-essential and demerit goods, and time-bound enforcement of trade-remedy measures to shield itself from the impact of the West Asia crisis, a report said.
The global economic landscape faces a profound stress test and geopolitical volatility in West Asia is driving structural cost-push inflation across essential sectors — energy, agriculture, and manufacturing, according to a report by Think Change Forum.
“The traditional fiscal response — relying on open-ended subsidies to buffer these shocks — is no longer sustainable. It creates a moral hazard by shielding firms from global volatility through perpetual subsidies, the policy disincentivises the structural efficiency and vertical integration necessary for global competitiveness,” it said.
This report proposes a strategic pivot — replacing blunt subsidy-led interventions with a precise, three-pillar framework of structural tax moderation and defensive trade alignment.
By dismantling inverted duty structures, calibrating tariffs dynamically, and restricting non-merit luxury imports, India can secure its domestic industrial base while maintaining fiscal discipline, it said, adding that this is a transition from reactive relief to proactive macroeconomic fortification.
As Prime Minister Narendra Modi recently emphasised, it said, reducing the import of non-essential goods is no longer an austerity measure — it is a cornerstone of national security and foreign exchange resilience.
India’s merchandise imports touched USD 774.98 billion in 2025-26 against exports of USD 441.78 billion, creating a trade deficit exceeding USD 333 billion, as per the data released by the Ministry of Commerce and Industry.
To defend the rupee and maintain economic sovereignty amidst global turmoil, the report said, India must actively weed out non-merit and low value-addition imports where robust domestic ecosystems already exist.
Unrestricted imports of low-value-addition discretionary products continue to create avoidable pressure on foreign exchange reserves while weakening opportunities for deeper domestic value addition, capacity expansion and employment generation.
The report also identified demerit goods, including imports of cigarettes, cigars, smoking tobacco, cut tobacco and manufactured tobacco substitutes, which crossed USD 116 million despite India already being one of the world’s largest tobacco producers with fully developed domestic manufacturing ecosystems.
Luxury confectioneries, premium personal care products and demerit goods should be moved from the Open General Licence (OGL) framework to restricted licensing channels linked to stricter quality compliance mechanisms.
It argued that this would help conserve foreign exchange, support domestic value addition and prevent scarce forex from being used for avoidable consumption imports.
Also purchase of luxury items such as watches, luxury cars can be deferred to a later date.
Rejection of DGTR anti-dumping recommendations surged from 0.5 per cent (1991-2020) to as high as 81 per cent between November and December 2025, raising concerns over domestic manufacturing protection and the need to immediately notify trade-remedy measures where injury has been established.
