India’s tax and trade policies are not aligned. It creates inefficiencies |
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India’s tax and trade policies are not aligned. It creates inefficiencies
India has made important strides with GST and corporate tax. Yet, exporters continue to grapple with delays in refunds and compliance burdens that erode competitiveness.
India’s ambition to secure a significantly larger share of global exports rests not only on manufacturing scale or geopolitical opportunity, but on something more foundational—the coherence of its tax and trade architecture. While considerable attention has focused on production-linked incentives, supply chain diversification, and free trade agreements, the deeper challenges lie in aligning domestic fiscal policy with external trade strategy.
At one level, India has made important strides. The introduction of the Goods and Services Tax (GST) unified the domestic market and reduced cascading taxes. Corporate tax rates have been rationalised, and targeted incentives have been deployed to boost manufacturing in key sectors. Yet, exporters continue to grapple with delays in refunds, inverted duty structures, and compliance burdens that erode competitiveness.
This reflects a structural disconnect. Tax policy remains driven primarily by revenue considerations, while trade policy is shaped by strategic and industrial priorities. The absence of alignment between the two creates inefficiencies that are particularly damaging in a world where margins are thin and competition is intense.
The cost of misalignment
The consequences of this disconnect are visible in........