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 everyday business decisions. Consider the inverted duty structures, where tariffs on raw materials exceed those on finished goods. Such anomalies discourage domestic value addition and make Indian manufacturers less competitive in export markets.
Equally important is the issue of tax certainty. Export-oriented industries rely on the predictability of costs, regulations, and policy direction. Frequent changes in tax rates or compliance requirements create uncertainty, deterring long-term investment. In contrast, successful export economies have built their competitiveness on stable and transparent policy regimes.
Trade facilitation challenges compound the problem. Despite improvements, logistics costs remain high, and procedural delays continue to act as hidden taxes on exports. Inefficiencies in tax administration and trade processes reinforce each other, raising the overall cost of doing business.
The global environment is changing rapidly, and some of those changes are in India’s favour. Supply chains are being reconfigured as firms seek resilience and diversification. The concentration of manufacturing in a few geographies is being reassessed, creating space for new players.
India is well-positioned to benefit from this transition. Its large domestic market, improving infrastructure, and growing technological capabilities make it an attractive destination. But opportunity alone may not be enough; credibility is going to be the key.
Credibility, in this context, means being seen as a reliable, predictable, and competitive partner. It requires ensuring that exporters are not disadvantaged by domestic policy inconsistencies. In a world where firms are making long-term location decisions, policy coherence can be as important as cost competitiveness.
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Toward policy convergence
Addressing this challenge requires moving beyond incremental fixes to a more integrated approach. Tax, trade, and industrial policy must be designed and implemented in tandem, rather than in silos.
This begins with rationalising tariff structures to eliminate distortions that discourage value addition. It requires improving the efficiency and timeliness of export-related tax refunds and incentive schemes. It also demands a stable and predictable regulatory environment that allows firms to plan and invest with confidence.
Equally important is strengthening trade facilitation, streamlining customs procedures, reducing documentation requirements, and improving logistics infrastructure. These are not peripheral reforms; they are central to export competitiveness.
Finally, India’s engagement with global trade rules must be informed by domestic priorities. A well-aligned internal framework provides the flexibility to support industry while navigating an increasingly complex international landscape.
India’s export ambitions are well articulated. The country has set itself the goal of becoming a major player in global trade, and the building blocks for success are already in place. What remains is the task of execution of ensuring that policies across domains reinforce rather than undermine each other.
This is not about choosing between revenue and competitiveness, or between protection and openness. It is about recognising that in a deeply interconnected global economy, these objectives must be pursued together.
If India is to claim its rightful share in global exports, it must first get its own house in order. The real constraint is no longer external—it lies in the internal misalignment of policy.
In a fragmenting world, where countries are weaponising trade and reconfiguring supply chains, incrementalism will not suffice. India must move decisively toward policy convergence—where tax policy enables trade, trade policy reinforces industrial strategy, and all three work toward a common goal.
The next phase of India’s economic rise will not be determined by ambition alone, but by coherence. And in that coherence lies the difference between participating in global trade and shaping it.
Shishir Priyadarshi is President, Chintan Research Foundation. Views are personal.
(Edited by Saptak Datta)