Up to PM Narendra Modi, Prez Donald Trump now to keep US-India trade talks on course

As talks between India and United States for a trade deal reached an impasse, it is now up to Prime Minister Narendra Modi and President Donald Trump to add political momentum to the negotiation and keep it on course.

It now appears to be difficult for India and United States to conclude negotiations for a trade agreement before Modi receives Trump in Ahmedabad on February 24. But the two sides are now hoping that Prime Minister and American President will at least be able to save the talks from being derailed, even if they cannot end the stalemate and agree on a limited-scope deal by the time they will meet in New Delhi on February 25, sources told the DH on Tuesday.

A trade deal was expected to be among the big-ticket deliverables of Trump's meeting with Modi in New Delhi during what would be his maiden visit to India as President of the United States.

Though Indian and American officials did make some headway in narrowing differences and moved closer to finalizing a deal; the tariffs, fees, and cesses proposed by Finance Minister Nirmala Sitharaman in Union Budget 2020-2021 on agricultural products, medical devices, auto-mobile accessories, electronics and electric vehicles emerged as new irritants.

New Delhi, however, conveyed to Washington D.C. that reduction of duties proposed by Finance Minister in her Budget 2020-21 on several items like fuel oil, petroleum coke, plastic, liquid crystal polymers, platinum and microphone parts opened up opportunities for US companies.

Trump Administration has been prodding Modi Government to remove the price caps on coronary stents, knee implants and other medical devices imported to India from the US. The two sides had agreed that the price caps would be replaced with limits on trade margins, particularly on the high-end and premium medical devices imported from the US to India. But the new 5% cess on import of medical devices proposed in Union Budget thwarted an agreement on the issue.

New Delhi has been nudging Washington D.C. to restore the Generalized System of Preferences (GSP) trade privileges for India. The special trade privilege was granted to India in 1976 for exporting goods to the US duty free. India's exports to the US under the GSP were worth $ 5.6 billion in 2017. But Trump Administration withdrew it in May 2019. Over the past few months, Washington D.C. signaled that it might partially restore the privilege for India – albeit with a rider that it would be proportionate to the level of access New Delhi would give the US companies to the market. But with the US on February 10 removing India from its list of “developing countries”, the restoration of the GSP benefits now seems unlikely.

New Delhi and Washington D.C. have been negotiating a trade deal for the past several months. The two sides had initially planned to sign it on September 24 last, when Prime Minister and US President had met in New York on the sideline of the United Nations General Assembly (UNGA) – just days after they had appeared together before nearly 50000 Indian-Americans at the “Howdy! Modi” rally in Houston. But notwithstanding bonhomie between Modi and Trump, Commerce Minister Piyush Goyal and US Trade Representative Robert Lighthizer could not narrow differences on several key issues.