India to ramp up purchases of US oil, arms, aircraft; open some farm access

New Delhi: India has agreed to buy petroleum, defence goods, and aircraft from the US, while partly opening up its highly-guarded agriculture sector under a trade deal, according to a government official, as the ​two sides reconcile after months of tensions.

President Donald Trump announced a trade deal with India ‌on Monday that slashes US tariffs on Indian goods to 18 per cent ⁠from 50 per cent in exchange for India ‌halting Russian oil purchases and lowering trade barriers.

Trump said India agreed to buy more American goods with purchases rising to as much as $500 billion including energy, coal, technology, agricultural and other products.

The Indian government official, who did not want to be named, said India has agreed to buy US goods including ​telecom and pharmaceuticals and offered market access for some agricultural products, as part of New Delhi's commitments under the deal.

India recently offered select market access for agricultural products to the European Union under a trade deal.

The Asian nation has also lowered ‌tariffs on ‌imported cars to address Washington's immediate US demands to conclude the first tranche of the deal, the official added.

India's trade ministry did not ⁠immediately reply to an e-mail seeking comment.

India's exports to the US rose 15.88 per cent year-on-year to $85.5 billion in January-November, while imports stood at $46.08 billion, Indian government data showed.

"The commitment to buy US products covers sectors like pharmaceuticals, telecom, defence, petroleum ⁠and aircraft. It will be done over the years," the official told ⁠Reuters.

The official said a more comprehensive pact with the US will be ‌negotiated over coming months.

DEAL LIFTS SENTIMENT

The announcement of a trade deal between ‌India and United States has reduced a great deal of global uncertainty, India's economic affairs secretary, Anuradha Thakur, said at an event in New Delhi on Tuesday.

It also lifted investor sentiment. India's benchmark stock ‍index, the Nifty 50, was up nearly 3 per cent and the rupee climbed over 1 per cent to 90.40 per dollar in early trading.

The 18% tariff offered to India is lower than its Asian peers and comes right in time as exporters are still negotiating annual contracts with their US customers, the official said.

Among Asian nations, US tariffs on goods from Indonesia stand at 19 per cent while the rate for Vietnam and Bangladesh stands at 20 per cent.

"Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into US ​supply chains,” said S.C. Ralhan, president ‌of the Federation of Indian Export Organisations.

Reduction in US tariffs on most Indian goods will reinvigorate India's goods exports to the US, Moody's Ratings said in a statement on Tuesday.