India, US reach framework for interim bilateral trade agreement

Washington/ New Delhi: India and the US on Saturday announced that they have reached a framework for the first phase of the bilateral trade agreement under which both sides will reduce import duties on a number of goods to boost two-way trade.

The framework reaffirms the two countries' commitment to the broader US-India Bilateral Trade Agreement (BTA) negotiations, launched by President Donald Trump and Prime Minister Narendra Modi on February 13, 2025, according to a joint statement.

While the US will reduce tariffs on Indian goods to 18 per cent from the present 50 per cent, India will eliminate or cut down import duties on all US industrial goods and a wide range of American food and agricultural products, including dried distillers' grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits.

The first phase of the pact is expected to be signed by mid-March. Implementation of the pact will lead to concessions and the elimination of duties on American goods by India.

The US, through a separate executive order, has eliminated the 25 per cent tariffs on India for purchasing Russian oil from February 7, as New Delhi has committed to stopping directly or indirectly importing oil from Moscow.

Trump's order has said that the US officials will monitor whether India resumes directly or indirectly importing Russian oil.

If it finds that India has resumed directly or indirectly importing the oil, the US officials shall recommend "whether and to what extent I should take additional action as to India, including whether I should reimpose the additional ad valorem rate of duty of 25 per cent on imports of articles of India," the order said.

The reciprocal tariff of 25 per cent will be reduced to 18 per cent after the US issues an executive order in this regard, which is expected soon.

The statement also said that India has expressed its intention to purchase USD 500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years.

"The US and India are pleased to announce that they have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade," it said.

On the development, Prime Minister Narendra Modi said the interim trade pact will strengthen 'Make in India' by opening up new opportunities for farmers and entrepreneurs, and create jobs for women and youngsters.

Commerce and Industry Minister Piyush Goyal said the interim pact will open a USD 30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen, as the US duties on Indian goods will come down to 18 per cent from 50 per cent earlier.

When asked about the oil issue, Goyal said that the external affairs ministry will respond to the matter.

In August last year, the US imposed 25 per cent reciprocal tariffs and an additional 25 per cent levy on India for its purchase of Russian oil, hitting Indian exporters hard as America is their largest export destination.

The reduction in tariffs will help boost exports of India's labour-intensive sectors such as textiles and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.

Additionally, tariffs will go down to zero on a wide range of goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts, thereby further enhancing India's export competitiveness and Make in India.

India will also get exemptions under section 232 on aircraft parts, tariff rate quota on auto parts and negotiated outcomes on generic pharmaceuticals, leading to tangible export gains in these sectors.

"At the same time, the agreement reflects India's commitment to safeguarding farmers' interests and sustaining rural livelihoods by completely protecting sensitive agricultural and dairy products, including maize, wheat, rice, soya, poultry, milk, cheese, ethanol (fuel), tobacco, certain vegetables, meat, etc," Goyal said.

Under the pact, India will eliminate import duties on certain US goods on the day the agreement comes into force, while duties on other items may be phased out over time. In some sectors, tariffs will be reduced, while in others, quota-based concessions will be provided.

Hailing the agreement, US Trade Representative Ambassador Jamieson Greer said President Donald Trump's dealmaking is unlocking one of the largest economies in the world for American workers and producers.

The joint statement also said that the two countries will "promptly" implement this framework and work towards finalising the interim agreement with a view to concluding a mutually beneficial Bilateral Trade Agreement (BTA).

In February last year, the two nations entered into negotiations for the first phase of the BTA. This framework will now be converted into a legal pact, which is expected to be signed by mid-March, following which India will start cutting down duties on specified American goods.

After the successful conclusion of the interim pact, tariffs will go down to zero on a wide range of Indian goods, including generic pharmaceuticals, gems and diamonds, and certain aircraft and aircraft parts.

"Similarly, consistent with the US national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to the tariff imposed to eliminate threats to national security," the statement said.

It added that New Delhi has agreed to address long-standing barriers to the trade in US medical devices, eliminate restrictive import licensing procedures that delay market access for, or impose quantitative restrictions on American Information and Communication Technology goods.

"Recognising the importance of working together to resolve long-standing concerns, India also agrees to address long-standing non-tariff barriers to the trade in US food and agricultural products," the statement said.

India and the US will also significantly increase trade in technology products, including Graphics Processing Units and other goods used in data centres, and expand joint technology cooperation.

To enhance ease of compliance with applicable technical regulations, the two countries plan to discuss their respective standards and conformity assessment procedures for mutually agreed sectors.

During 2021-25, the US was India's largest trading partner in goods. The US accounts for about 18 per cent of India's total exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade. In 2024-25, the bilateral trade touched USD 186 billion (USD 86.5 billion exports and USD 45.3 billion imports).

With America, India had a trade surplus -- or the difference between imports and exports -- of USD 41 billion in 2024-25. It was USD 35.32 billion in 2023-24 and USD 27.7 billion in 2022-23.

Goyal added that India's exports worth about USD 44 billion to the US will enter the American market at zero reciprocal tariffs under the agreement.

While Indian goods worth about USD 30 billion will continue to attract an 18 per cent tariff (which includes goods from the labour-intensive sectors), there will be no change in duties on goods worth USD 12 billion (including steel, copper and certain auto parts).

Commenting on the deal, the Congress claimed that the Indo-US trade pact is "not a deal but a surrender" of the country's self-esteem and interests, and that it is a betrayal of India and its people.

Congress's media and publicity department head Pawan Khera said India will soon become a dumping ground for American products that will hurt the interests of the farmers and small and medium industries here.