New Delhi: India and the United States are set to sign an interim trade agreement this week, covering key areas such as agriculture, processed foods and industrial tariffs. The deal has been finalised after months of negotiations between both countries.
India has agreed to reduce tariffs on certain U.S. agricultural imports, including apples, nuts like blueberries and blackberries and selected processed food products. However, New Delhi has made it clear that there will be no agreement on genetically modified (GM) crops. According to officials, GM crops remain a red line due to domestic concerns and upcoming trade talks with the European Union (EUFTA).
The deal includes a tariff structure where Indian goods entering the United States will face an average tariff of 11.5%, while U.S. goods entering India will face a 7% tariff.
India has also refused a blanket tariff approach on automobiles. Instead, it has asked for separate slabs based on vehicle type and category. The United States is said to have accepted this proposal.
There is also no agreement on dairy products. The United States had pushed for broader access to India’s dairy market, but India has not accepted this, citing the potential impact on small farmers and rural incomes. Only processed dairy items will be allowed under the agreement.
The deal comes at a time when the US is revising its trade approach with several countries. President Donald Trump has announced higher tariffs on exports from the European Union (EU), Japan, South Korea, Mexico and other nations, starting August 1. India is seen as a key trade partner in this changing environment.
Meanwhile, a report by SBI Research suggests that India could benefit from this realignment. The study says India has a comparative advantage in chemical exports, including pharmaceuticals. If New Delhi captures just 2% of the U.S. chemical import market, this could add 0.2% to India’s GDP.
The report also highlights opportunities in the textile and apparel sectors. If India increases its share in the U.S. apparel market by 5%, it could add another 0.1% to GDP.
India is also reviewing its Free Trade Agreement (FTA) with ASEAN countries. The aim is to address tariff gaps and prevent large-scale dumping of goods from countries like China through ASEAN partners.
However, the SBI report also warns about potential risks to the Indian dairy sector. If the sector were opened to U.S. dairy imports, milk prices could fall by 15%, causing an estimated income loss of Rs 1.03 lakh crore to farmers. It could also result in a Rs 51,000 crore loss to India’s gross value added (GVA), with major effects on rural employment.
Final talks on the interim deal are expected to conclude this week. Officials from the Ministry of Commerce and Industry have already reached Washington for the signing. The agreement is part of broader trade discussions that may continue in the coming months.
