The government may undertake a major exercise to reduce the basic customs duty or import tariff on a large number of goods, especially critical raw materials and intermediate goods, in the Budget for FY27. This will be a fully autonomous initiative to lower the tariff barriers for the benefit of domestic value creation in assorted supply chains, despite the backdrop of Trump tariffs and a flurry of free trade agreements (FTAs) being negotiated. "A sharper focus on correcting tariff structures will help encourage local value-addition in both manufacturing and services with manufacturing linkages, attract fresh investments, and cushion the impact of a swelling import bill", said a source.

In parallel, the Customs procedures would be eased further, with greater digitization, faceless processing and integration of operational parameters of large ports.

"India must progressively reduce its weighted average customs duty from about 14% now to 2% to align with the world's top economies. A period of rupee depreciation, when import values are higher and the customs base expands, is the most opportune time to do this", said noted tax expert and former senior IMF economist Arbind Modi. Both the revenue risks and inflation pressures are contained at this juncture, he noted.