India-US Trade Deal To Finalise Soon

Syllabus: GS2/International Relation

Context

• In a recent address, the US President signaled the possibility of a ‘very big’ trade deal with India, suggesting that negotiations between the two nations are gaining momentum.

About India-USA Trade Deal

• Past Engagements:
  • Post-independence: India’s protectionist policies and the US’s Cold War alliances limited deep economic engagement.
  • 1991 Reforms: India’s economic liberalization marked a turning point, opening the door to greater foreign investment and trade.
  • 2005–2015: The US emerged as a key trading partner, with bilateral trade growing steadily.
    • Initiatives like the US-India Trade Policy Forum (TPF) were launched to resolve disputes and deepen ties.
• Present Scenario:
  • Trade Volume: Bilateral trade reached $191 billion, making the US India’s largest trading partner.
  • Tariff Tensions: The US imposed a 10% baseline tariff and proposed a 26% reciprocal tariff on Indian goods in April 2025, citing trade imbalances.
  • Negotiations Underway: Talks have intensified, with both sides aiming to finalize an interim trade deal before July 9, 2025. Key areas include:
    • Market access for agricultural and industrial goods, including entry of genetically-modified (GM) crops;
    • Tariff concessions for Indian textiles, pharmaceuticals, and electronics;
    • Digital trade and customs facilitation.

Key Concerns in US-India Trade Relations

• Tariff Disparities: India maintains one of the highest average applied tariffs among G20 nations — around 17%, compared to the US average of 3.3%. India is seeking full exemption from these duties.
  • The US is looking for greater market access, especially in sectors like agriculture, dairy, and industrial goods.
• Agriculture and Dairy Sensitivities: India is cautious about opening its agriculture and dairy sectors, citing the need to protect small farmers and domestic producers.
  • These sectors are politically sensitive and have become major sticking points in trade talks.
• Steel and Aluminum Tariffs: The US has imposed reciprocal tariffs of up to 26% on Indian steel and aluminum exports, citing national security concerns.
  • India has protested these measures and is seeking concessions.
• Regulatory and Infrastructure Barriers: U.S. exporters often face non-transparent regulations, price sensitivity, and infrastructure bottlenecks in India.
  • These include delays in project approvals, inconsistent state-level policies, and logistical inefficiencies.
• Digital Trade and Data Localization: India’s push for data localization and its stance on digital sovereignty have raised concerns among US tech firms.
  • Negotiations are ongoing to find common ground on digital trade norms.

Way Forward

• India & US remain committed to finalizing a multi-sector Bilateral Trade Agreement (BTA) by end 2025.
  • The goal is to double bilateral trade to $500 billion by 2030, up from $191 billion in 2024–25.
• As both nations work toward a comprehensive trade pact, the outcome could reshape global supply chains, bolster economic resilience, and set a precedent for equitable globalization.

Source: TH