The India-US trade deal has faced significant delays, becoming a focal point of economic and political discussion. Several factors contribute to this delay, primarily revolving around disagreements on key issues such as agricultural market access, tariff rates, and data localization. These factors have also impacted the Indian stock market, creating uncertainty among investors.
One of the main sticking points is the US demand for greater access to India's agricultural and dairy markets, including genetically modified (GM) products. India has been hesitant to concede, aiming to protect its farmers and their livelihoods. The dairy sector, in particular, is sensitive due to cultural and economic factors. Millions of Indian families rely on small-scale dairy farming, and the government fears that cheaper US dairy imports could negatively impact local milk prices. Specifically, India has expressed concerns over the feed given to cows in the US, insisting on certification that imported milk comes from vegetarian-fed cows, a demand the US has resisted.
In addition, India is seeking lower tariff rates than those granted to other Asian nations that have already signed deals with the US, to gain a competitive edge. At the same time, the US has been raising tariffs on Indian steel, aluminum, and auto exports. These conflicting demands have made it difficult for both sides to reach a consensus.
Another contentious issue is data localization. The US is pushing India to relax its data localization rules and provide greater digital market access for American tech firms. India, however, is taking a cautious approach to protect its digital sovereignty.
The delay in the trade deal has had a discernible impact on the Indian stock market. Market analysts believe that a favorable trade deal could trigger a rally in the market and potentially drive frontline indices to record highs. The lack of progress has dampened market sentiment, leading to uncertainty among investors. As a result, frontline indices have been trading in a tight range, and the market has experienced volatility.
Furthermore, delays could result in lost export competitiveness, retaliatory tariffs, and a strain on the broader US-India strategic alignment, including tech and defense cooperation. Some experts suggest that the longer the delay, the closer India, China, and Russia might move, posing a geopolitical challenge for the US.
Despite the current impasse, there remains optimism that a deal will eventually be reached. Some experts anticipate a phased approach to the negotiations, covering several years. A successful trade deal could boost bilateral trade, create better export opportunities for Indian entities, and improve investor confidence. It may also help India achieve its goal of doubling trade volumes with the US to $500 billion.
However, analysts advise caution, emphasizing that the benefits of the deal could be overshadowed by potential tariffs imposed by the US. They suggest investors remain vigilant about what India secures for its IT, pharma, and textile industries.
Overall, the delay in the India-US trade deal is attributed to disagreements on agricultural market access, tariff rates, and data localization. This uncertainty has affected the Indian stock market, causing volatility and dampening investor sentiment. While hopes for a deal remain, experts urge caution, highlighting the potential impact of tariffs and the need for India to secure favorable terms for its key industries.
