India and the United States are currently engaged in intense negotiations for a Bilateral Trade Agreement (BTA), with both sides aiming to reach an interim agreement before the July 9 deadline. Protecting Indian interests remains the top priority for the Indian government during these talks. As the negotiations progress, several key issues and challenges have emerged, highlighting the complexities of forging a mutually beneficial trade deal.
One of the main hurdles in the ongoing discussions is the US demand for lower-duty imports of American agricultural products, including maize and soybean. Indian authorities are hesitant to agree to this, fearing an adverse impact on domestic farmers and expressing concerns about genetically modified (GM) food. This issue has become a significant sticking point, with negotiators from both sides struggling to find common ground.
In addition to agricultural imports, the US is also pushing for the elimination of tariffs and the easing of price controls on medical devices. Furthermore, they are seeking relaxed rules on data localization policies, which mandate the storage of data on local servers. These demands have raised concerns among Indian officials, who are carefully considering the potential implications for various sectors of the Indian economy.
On the other hand, India is seeking exemptions from US tariffs on steel, automobiles, and pharmaceuticals. The country is also requesting exceptions from reciprocal tariffs and other measures imposed by the US. These demands reflect India's desire to protect its key industries and ensure fair access to the US market.
The negotiations have gained momentum in recent months, particularly after the US imposed reciprocal tariffs. However, recent reports suggest that the talks have hit a roadblock, with both sides hardening their stances on several key issues. Despite these challenges, both India and the US are continuing to negotiate, with the hope of reaching an interim trade deal before the July 9 deadline.
If an agreement is not reached by the deadline, Indian exporters may face a 26% levy on their shipments to the US. This has created a sense of urgency to reach a mutually acceptable solution. To avoid this, the Indian government is keen on securing zero-duty access for several products of interest to India, including textiles, leather goods, pharmaceuticals, engineering goods, and auto parts.
According to sources, the US may not offer any reduction in its Most Favored Nation (MFN) tariffs, as it lacks the necessary Congressional authority. However, MFN cuts may be made in the full first tranche of the India-US BTA, which is expected in the fall of 2025.
Despite the challenges and complexities, both India and the US recognize the strategic importance of a strong bilateral trade relationship. The two countries aim to more than double bilateral trade to $500 billion by 2030, from the current level of $191 billion. This ambitious goal highlights the potential for increased economic cooperation and the mutual benefits that can be derived from a comprehensive trade agreement.
