Beyond Zero Tariffs: India-US Trade Pact Targets Sectoral Gains by 2030

Updated: April 13, 2025 22:00

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The eagerly awaited bilateral trade agreement (BTA) between the United States and India is moving ahead, with both countries looking to more than double the volume of trade to $500 billion by the year 2030. Nonetheless, a "zero-for-zero" tariff strategy—both parties removing tariffs from certain goods—seems unlikely given the varied stages of economic development in each country. The agreement, however, is instead likely to have a more inclusive "package deal" focus.

Economic Imbalances: A "zero-for-zero" tariff policy has been eliminated by officials due to considerable disparities in economic frameworks and development levels between India and the US. Such policies are easier to implement between equally developed economies such as the US and the EU.
Emphasis on Sector-Specific Negotiations: Both countries are having sector-specific negotiations, focusing on sectors like industrial goods, agriculture, textiles, and electronics. The aim is to simplify trade norms and increase investments.
India's Priorities: India is seeking reduction in tariffs for labor-intensive industries like textiles, gems and jewelry, leather, and horticulture products. All these sectors are crucial for Indian export growth.
US Demands: The US is demanding duty concessions on industrial products, electric vehicles (EVs), wines, petrochemicals, and agricultural products like apples and tree nuts.
Timeline for Agreement: The initial phase of the BTA is likely to be completed by September-October 2025. Both parties have shown optimism about securing a mutually beneficial agreement.
PLI Scheme Considerations: India has been willing to offer zero-duty imports in selected sectors under its Production Linked Incentive (PLI) scheme. However, these exceptions will be qualified by rigorous rules of origin in order to safeguard against misuse by third-country traders.
Trade Growth Ambitions: The current two-way trade between India and the US is at $191 billion. The accord seeks to grow this figure to more than twice the size in 2030.

Conclusion

Though a "zero-for-zero" tariff approach is still in the offing, the India-US BTA is set to bolster economic relationships based on concessions and sectoral packages. Both countries are negotiating towards a pragmatic framework that reconciles their individual economic interests.

Sources: Business Standard, The Week, Deccan Chronicle, Economic Times, Times of India

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