Trade Agreement Between India and the US
Overview and Protection of Sensitive Sectors
India has successfully protected its sensitive agriculture and dairy sectors in the recently concluded trade deal with the United States, according to Union Commerce and Industry Minister. The agreement aims to protect Indian interests while providing vast opportunities across various sectors.
Tariff Reductions and Sensitive Sectors
- Tariff Reductions:
- New Delhi will reduce tariffs on industrial and agricultural goods but continue to protect sensitive sectors like dairy, poultry, and genetically modified foods.
- Tariffs on non-sensitive agricultural products will be reduced to zero, while sensitive items will have graded reductions and quotas.
- Industries such as automobiles and alcohol will see a phased tariff reduction.
- Average Industrial Goods Tariff: Reduced to zero for 98-99% of products from the previous 13.5%.
Opportunities for Indian Industries
The trade agreement is expected to open significant opportunities for India's labor-intensive sectors, such as textiles, plastics, apparel, home decor, leather and footwear, gems and jewelry, organic chemicals, rubber goods, machinery, and aircraft components, with duties set to be sharply reduced.
Impact on Indian Exports
The agreement follows U.S. tariffs of up to 50% on several Indian exports. Notably, India exported $86.5 billion worth of goods to the US in the 2024-25 financial year. The reduction in duties aims to bring India to parity with regional competitors, making Indian exports more competitive.
Future Prospects and Understanding
- Joint Statement: Both countries will issue a joint statement outlining the details of the first phase of the agreement.
- Expansion of US-India Trade:
- India aims to purchase $500 billion worth of goods from the US over the next five years.
- This includes significant investments in technology products, oil and gas, and precious metals.
- Non-Trade Barriers: There is an understanding to accept US standards to reduce India's technical non-tariff barriers.
Market Dynamics and Additional Tariffs
Products such as steel, aluminum, copper, automobiles, and auto parts will continue to attract additional tariffs under Section 232 of US domestic law. However, these tariffs are not country-specific, minimizing disadvantages for Indian exporters.
