At the recent Hindustan Times Leadership Summit, Union finance minister (FM) Nirmala Sitharaman announced that India will overhaul its customs system by simplifying procedures, reducing discretion, improving transparency and cutting tariff rates that are “over the optimal level”.

The statement could not have come at a better time. Nearly 29% of India’s GDP today passes through customs as merchandise exports and imports, yet the system managing this vast flow still reflects an older era, only partly transformed by digital tools. India’s merchandise trade crossed $1.16 trillion in FY2025, but customs processes continue to slow business rather than speed it up. Tariff information remains scattered and difficult to find. Customs notifications are difficult to understand. Export incentives are sometimes lost to clerical or software errors rather than policy design. So, the FM’s statement presents an extraordinary opportunity. Unlike most reforms, customs modernisation requires relatively little public spending but produces system-wide gains: lower logistics costs, quicker movement of goods, fewer disputes and stronger investor confidence. Few areas offer as much return for as little investment.

Here are a few areas that must be the focus of such reforms.

To start with, tariff rationalisation must get high priority. Customs duty contributes only about 6% of total tax revenue and hence revenue is no more a justification for keeping tariffs high. More than 90% of imports fall under fewer than 10% of tariff lines, while over half of all tariff lines barely raise any revenue. Still, India taxes many........

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