India and the United States have announced a framework for an interim trade agreement aimed at fostering balanced and mutually beneficial trade relations. This agreement marks a significant step forward in strengthening economic ties between the two countries and is seen as a stepping stone towards a more comprehensive Bilateral Trade Agreement (BTA).
The interim agreement includes several key provisions designed to boost trade and investment. A central component is the reduction of tariffs on Indian goods exported to the US, which will be lowered to 18%. This is a significant decrease from the previous tariffs, which in some cases were as high as 50%, potentially giving Indian exporters a competitive edge in the US market. Sectors expected to benefit include textiles, pharmaceuticals, gems and jewelry, and footwear.
In return, India will reduce or eliminate tariffs on a range of American industrial, food, and agricultural products. This includes items such as dried distillers' grains, red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine, and spirits. While opening its markets, India has stated that it has carefully safeguarded sensitive agricultural and dairy products to protect the interests of its farmers.
The agreement has been welcomed by officials from both countries. Union Commerce and Industry Minister Piyush Goyal highlighted that the framework could unlock a $30 trillion market for Indian exporters, particularly benefiting MSMEs, farmers, and fishermen. He also anticipates the creation of numerous job opportunities for women and youth as a result of increased exports. Agriculture Minister Shivraj Singh Chouhan emphasized the protection of key crops and dairy items, while also pointing to new export opportunities for Indian products like basmati rice in the US market.
The interim agreement also addresses non-tariff barriers affecting US food and agricultural products and aims to align standards and conformity assessment procedures to ease compliance. Furthermore, the US will remove tariffs on Indian aircraft and aircraft parts. Both countries have also committed to providing each other preferential market access in sectors of mutual interest.
The US intends to remove reciprocal tariffs on various Indian goods, including generic pharmaceuticals, gems and diamonds and aircraft parts, subject to the successful conclusion of the interim agreement. India has also expressed its intention to purchase $500 billion worth of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years.
While the interim agreement has been largely welcomed, some concerns have been raised. Congress leader Jairam Ramesh pointed out the lack of details in the joint statement and suggested potential disadvantages for Indian farmers and exporters. However, the government has emphasized the benefits of the agreement for Indian businesses and the economy as a whole.
Overall, the interim trade agreement between India and the US represents a significant step towards closer economic cooperation. It is expected to boost trade, investment, and job creation in both countries, while also paving the way for a more comprehensive trade agreement in the future.