Customs duties regulate India's merchandise imports exceeding $700 billion, or a fifth of the gross domestic product (GDP). India has been progressively bringing down these import tariffs over the last about four decades. Barring a short period of tariff escalation in 2018-2024, the duties have been on a declining path, both via the most favored nation (MFN) roue and the preferential tariffs under a growing number of free trade agreements.

The Budget FY27 is expected to trim Customs duties across a wide spectrum of tariff lines, while also reducing the number of Customs slabs further. This and the widening FTA route will help the country to be a low-tariff country, with commitment to open trade and disprove charges of being a "tariff king". In fact, with Customs revenue being less than 4% of the overall Budget receipts, India retains scope for large-scale reduction of duties for tariff lines that are practically not import-intestine.

Since 2019, India has signed new trade pacts (FTAs/CEPAs) with Mauritius, UAE, Australia, European Free Trade Association (EFTA), and the UK. A major FTA with the European Union, the country's largest trading partner, is set to be concluded today (January 27), while the full terms of the pact will be implemented over the next one year or so.