Tariff

🎯 How This Word Works in UPSC Writing

A duty levied on goods crossing a border. The classification carries the analysis: a specific tariff is charged per unit, an ad valorem tariff as a percentage of value, and a compound tariff combines both, which matters because a specific duty's protective effect erodes with inflation while an ad valorem duty's does not. In WTO terms the distinction between the bound rate, the ceiling a member has committed not to exceed, and the applied rate actually charged is essential, because the gap between the two is the policy space a country retains to raise duties without breaching its commitments, and India's bound rates sit substantially above its applied rates. The economic effect should be stated plainly: a tariff raises the domestic price, transferring income from consumers to protected producers and to the exchequer while creating a deadweight loss, and the infant industry argument for accepting that cost holds only where protection is temporary and conditional on performance, which in practice it rarely is.