India is currently engaged in active discussions with the United States to reduce import duties on labour-intensive sectors as part of a proposed bilateral trade agreement (BTA). These negotiations are happening against the backdrop of the United States' temporary pause on imposing higher tariffs on several countries, including India.

India is particularly interested in duty concessions for sectors such as textiles, apparel, gems and jewellery, leather, plastics, chemicals, oil seeds, shrimp, and horticulture products. These industries are crucial for India's economy as they provide significant employment opportunities.

The United States, on the other hand, is seeking concessions on certain industrial goods, automobiles (especially electric vehicles), wines, petrochemical products, dairy, and agricultural items like apples, tree nuts, and alfalfa hay.

Key Points of the Negotiations:

• Bilateral Trade Target: Both countries aim to more than double bilateral trade in goods and services to $500 billion by 2030 from the current $191 billion.
• Interim Trade Arrangement: India and the U.S. are exploring opportunities for an interim trade arrangement in goods to secure "early mutual wins" ahead of finalizing the first phase of the proposed BTA by the fall of this year.
• Tariff Pause: The discussions are being accelerated due to the 90-day tariff pause announced by the U.S. President, which is effective until July 9. This pause provides a window of opportunity for both sides to reach a mutually beneficial agreement.
• Trade Deficit Concerns: The United States has expressed concerns over the widening trade deficit with India. In 2024-25, India had a trade surplus of $41.18 billion in goods with the U.S.
• Non-Tariff Barriers: The negotiations also involve addressing non-tariff barriers to trade, such as mandatory quality control orders and compulsory domestic testing and certification requirements.
• Reciprocal Tariffs: India has proposed retaliatory tariffs on selected U.S. goods in response to American duties on steel and aluminum. However, there are reports that India is considering holding off on these tariffs to facilitate trade negotiations.

Recent Developments:

• An Indian delegation, led by Commerce Minister Piyush Goyal, is scheduled to visit Washington from May 17-20 to discuss the BTA with U.S. Trade Representative Jamieson Greer and U.S. Commerce Secretary Howard Lutnick.
• Prior to this, the Indian Chief Negotiator Rajesh Agrawal and Assistant USTR for South and Central Asia Brendan Lynch, met in Washington for preparatory talks.
• U.S. Vice-President JD Vance has also expressed support for stronger India-U.S. relations, emphasizing the importance of successful collaboration for a "prosperous and peaceful" 21st century.

India's Export Basket to the U.S.:

In 2024, India's main exports to the U.S. included:

• Drug formulations and biologicals ($8.1 billion)
• Telecom instruments ($6.5 billion)
• Precious and semi-precious stones ($5.3 billion)
• Petroleum products ($4.1 billion)
• Gold and other precious metal jewellery ($3.2 billion)
• Ready-made garments of cotton ($2.8 billion)
• Products of iron and steel ($2.7 billion)

Challenges and Way Forward:

Despite the progress in negotiations, some challenges remain. The U.S. is seeking greater access to India's agriculture sector, which is politically sensitive. Moreover, ensuring a balanced and reciprocal trade agreement is crucial for both countries.

The coming weeks are critical as both nations aim to leverage the tariff pause to achieve early wins and pave the way for a comprehensive BTA. The focus is on improving market access, clarifying rules of origin, and addressing non-tariff barriers to create a more robust and mutually beneficial trade relationship.