India-US Trade Agreement: A Historic Turning Point for Indian Industries

Calling the India-US trade agreement “a historic turning point,” Commerce Minister Piyush Goyal on Tuesday said it would unleash tremendous opportunities for the Indian industry, especially the small and medium enterprises and labour-intensive units. “The agreement protects the interests of our agriculture and dairy sectors in full respect, while opening up huge opportunities for the labor-intensive sectors..,” he said, discounting fears that some compromises might have been made with respect to these sensitive areas. “This is the best deal India has received. It is a deal for all of us, bringing positive signals for the bright future of our citizens,” Goyal said. The slashing of the additional US tariff from 50% to 18%, which would put India at a relative advantage over key Asian competitors, would take effect immediately after a joint statement is issued by both sides in 2-3 days, the minister said. This is even as implementation of the full agreement would take some more time, as the legal texts were required to be ratified. The tariff cut under the deal might take India’s economic growth in 2026–27 closer to 7.4%, the estimated level for the current year, Chief Economic Adviser V. Anantha Nageswaran said. This implies incremental growth of around 20-30 basis points over the Economic Survey 2025-26 forecast of 6.8-7.2% for the next financial year. The US Trade Representative Jamieson Greer said under the deal, India’s industrial tariffs will go to zero from 13.5%. The agreement brings down duties for India lower than its competitors like Vietnam, Indonesia, Malaysia, Thailand and even the Least Developed Countries (LDC) countries like Bangladesh, Cambodia and makes India’s exports competitive again. It comes at the opportune time for exporters whose contracts and relationships with buyers were coming under stress as they were finding it difficult to compete due to duty differential. Now with this announcement, all these contracts will therefore now get a new lease of life. “The agreement protects the sensitive sectors, the interests of our agriculture and our dairy sectors in full respect, opening up huge opportunities for our labor-intensive sectors, export sectors in textiles, plastics, apparel, home decor, leather and footwear, gems and jewelry, organic chemicals, rubber goods, machineries, marine products and aircraft components,” the minister said. As part of the deal India has also agreed to buy $ 500 billion of American products. This target is for a period of five years, sources said. India would be buying more oil and gas, technology items like advanced chips and data centres, precious metals and gems, aeroplanes and their parts. These purchases would be possible as even in aviation alone $ 100 billion orders are placed or are in pipeline, they added. India is a fast-growing economy and demand is continuously increasing. “Our demand for ICT products, our demand for data center equipment, our demand for high-quality technology and innovation, our demand for raw materials is continuously rising. And in that situation, this deal also opens up opportunities for India to get the best-in-class, world-class technologies,” the minister added. The deal will also aid investment flows in advanced technologies, data centers, global capability centres, supply-chain integration, semiconductor and Artificial Intelligence (AI) through collaborations, Goyal said. Along with purchase commitments, on its part India will be bringing down tariffs for the US in the same way it is done in its other free trade agreements. In the FTAs duties on some products are removed immediately when the agreement comes into force and in some products the elimination is gradual. In some other products there is a reduction but not to zero. Apart from reduction in additional duties, the US could also eliminate duties on select products, sources said without giving details. They, however, said India has also not agreed to opening up the Indian market for genetically modified crops, sources said. In industrial goods, including automobiles, India would also be bringing down duties. In some industrial goods duties will be down to zero in a phased manner. The reduction of reciprocal and penal duties to 18% from 50% would immediately impact $ 30 billion of India’s exports in sectors like textiles and apparel, leather and footwear, chemicals, plastics, rubber and handicrafts. Then there are negotiations happening in sectors beyond these that are not covered by reciprocal tariffs. Many of the sectors like pharma and electronics are already exempt which account for around $ 28 billion of exports. Then there are other items like food products and minerals where duties are zero/ Another $ 28 billion of exports are covered by Section 232 tariffs that were imposed on grounds of national security. These tariffs on steel, aluminium, copper, auto and auto parts apply to all countries equally so do not impact only India’s competitiveness. In 2024 India’s exports to the US were $ 87.3 billion while imports were $ 41.5 billion. Higher imports from will address the US demand for balancing bilateral trade and was the reason reciprocal tariffs of 25% were imposed. When India and US started negotiations on their Bilateral Trade Agreement (BTA) in February last year they had set the target of taking their bilateral trade in goods and services to $ 500 billion by 2030 from $ 200 billion at present.