Budget 2026: Customs duties on several goods may go up; government looks to reduce import dependence

Budget 2026: With an aim to reduce import dependence and narrow trade deficit, the government may raise the customs duties on several goods in the upcoming Union Budget 2026. A mix of higher customs levies and some incentives for products that continue to see heavy import volumes despite being manufactured domestically, are being considered.

According to an ET report, the move aims to narrow the merchandise trade deficit and also lower the reliance on concentrated supply sources such as China. People familiar with the matter said the measures may be announced in the Union Budget. “In certain product categories, our import dependence on specific regions remains high. The objective is to reduce that risk,” a government official was quoted as saying.

Reducing import dependence, especially from China

At present, customs duties on many of these items are in the 7.5% to 10% range. The move is being considered against the backdrop of a steadily higher merchandise trade deficit. Between April and November of FY26, India’s goods exports stood at $292 billion, while imports during the same period amounted to $515.2 billion, highlighting growing concerns within the government about external sector risks.

According to the official quoted above, the approach would vary by product, with some sectors receiving fiscal incentives while others could see an increase in import duties.

Authorities have identified roughly 100 goods that may be covered under the new plan. The list includes engineering and steel products, machinery, as well as consumer goods such as luggage and flooring materials.

Industry has also been encouraged to move away from over reliance on single source supply chains and invest in building domestic alternatives, according to a person aware of the discussions.

However, challenges remain. “One concern is that the quality of some domestically manufactured products is lower, while their prices are often higher than comparable imports,” said a representative from the steel sector.

China continues to be a major source of imports across multiple product segments. In FY25, India imported umbrellas worth $20.85 million - $17.7 million of which came from China.

Imports of spectacles and goggles were around $114 million in 2024-25, and about half of this volume came from China - a sizable portion entering through Hong Kong, while Italy was the third largest supplier. In certain categories of agricultural machinery, China supplies as much as 90% of India’s import requirements.

This skewed dependence is evident in bilateral trade figures as well. During April to November of FY26, India exported goods worth $12.2 billion to China, while imports from the country stood at $84.2 billion, leaving a trade deficit of roughly $72 billion.


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