The recently concluded India-US trade deal is projected to significantly boost India's economic growth, potentially lifting the GDP to 7.4% in FY27, according to the Chief Economic Adviser (CEA). This optimistic outlook follows Washington's decision to reduce tariffs on Indian goods to 18%, a move that is expected to enhance India's competitive edge in the global market.
The CEA highlighted that the trade agreement is likely to stimulate stronger capital inflows and improve investment sentiment, as the reduced tariffs and better access to the United States market diminish trade frictions. This could result in enhanced export opportunities and a reduction in trade barriers, further contributing to India's economic growth.
The agreement, which has been under negotiation since early 2025, marks a significant breakthrough after talks faced obstacles due to steep tariffs imposed last August. The US had previously imposed duties on Indian goods, with a portion linked to India's crude oil purchases from Russia. However, with the new deal in place, these tariffs have been substantially reduced.
President Trump has stated that the trade deal includes India halting Russian oil purchases, lowering trade barriers and committing to "BUY AMERICAN at a much higher level". While details on specific agricultural products and quantities remain unclear, Trump mentioned India would buy more than $500 billion worth of U.S. energy, including coal, as well as technology and agriculture products.
The reduction in tariffs is expected to benefit several sectors, including engineering, electronics, textiles, and leather goods. These export-oriented industries can now compete more effectively with regional rivals. Industry leaders have welcomed the deal, noting that it will strengthen India's position as a global manufacturing hub.
The Economic Survey 2025-26 had earlier projected India's real GDP growth for FY27 to be in the range of 6.8%-7.2%. However, the CEA suggests that the new trade deal offers an upside to this outlook, potentially pushing growth closer to 7.4%. The government's medium-term growth estimate of around 7% was framed independently of the India-US agreement, factoring in tariff uncertainty.
Analysts believe the trade deal will reduce uncertainty for investors, signaling policy continuity and predictable returns. It also positions India as a key manufacturing hub, accelerating supply-chain relocation with scale, skilled labor, and infrastructure incentives. For US companies, it offers a stable alternative market, diversifying exposure beyond China and cushioning demand cycles with a growing consumer base.
While the tariff truce is being celebrated, experts emphasize that the full implementation schedule, product lists, and timelines need to be formalized through executive orders, cabinet approvals, and regulatory mechanisms. Clarity on tariff phase-downs, rules of origin, and non-tariff measures is essential for businesses to take full advantage of the agreement.
Overall, the India-US trade deal is seen as a positive step towards strengthening bilateral economic relations and boosting India's economic growth. The reduction in tariffs, coupled with increased capital inflows and improved investor sentiment, is expected to drive growth in the coming years.