Blueprint in the works for $500 bn bilateral trade target set by PM Modi & Trump for 2030
A trade deal that could reduce duties on US products is unlikely to be a major concern as for nearly 75 per cent of US exports to India, like petroleum products and chemicals, the average tariffs are already below 5 per cent
The Indo-US Bilateral Trade Agreement (BTA), currently under negotiation, is poised to significantly enhance bilateral trade and cooperation across various sectors, from defence and energy to technology and agriculture.
Both India and the US have set an ambitious target to double bilateral trade to $500 billion by 2030, covering areas such as artificial intelligence, semiconductors, and the establishment of supply chains for strategic minerals. These collaborations align with the global push for resilient supply chains and reducing dependence on certain countries for critical technologies.
The broad contours of the negotiations, gleaned from the joint statement issued at the conclusion of Prime Minister Modi’s recent visit to the US, show that one of the main aspects of the proposed agreement revolves around market access and tariff reduction, where India has pledged to lower tariffs on select US products, including bourbon, motorcycles, and information and communication technology (ICT) goods, while the US seeks reciprocal tariff reductions to ensure a level playing field for American exporters. US President Trump has emphasised the need for India to address high tariffs on US goods, and this remains a crucial part of the ongoing negotiations.
Another key issue being addressed is the trade imbalance, as the US has expressed concerns over its trade deficit with India, which stood at $45.6 billion in 2024. The BTA aims to address this imbalance through increased exports and reduced tariffs, ensuring that American businesses find it easier to operate in the Indian market.
In the area of defence and energy cooperation, India is considering increasing its purchases of US defence equipment, potentially including advanced systems like the F-35 stealth fighters. There have also been discussions about India boosting its imports of US oil and gas, aligning with its energy security needs and diversifying its sources.
Despite these promising areas of cooperation, there are several challenges that need to be addressed before the agreement is finalised. One of the primary concerns is agricultural tariffs, as India may need to reduce tariffs on US agricultural products, which could impact local farmers and the domestic agricultural industry.
Data localisation and privacy regulations are also a contentious issue, as India might be required to relax data localisation policies, which could significantly benefit US tech giants but pose challenges for Indian companies that prioritise local data storage for regulatory and security reasons.
Another key sticking point is intellectual property rights, as the US is likely to push for stricter IP protections, which could lead to higher costs for medicines and other essential products in India, impacting affordability and access for millions of consumers.
However, Indian industry and trade experts remain optimistic. They see an opportunity to expand business with the US after Prime Minister Modi met President Trump, despite uncertainties over reciprocal tariffs and thanks to business-friendly steps taken in the past few years.
New Delhi has in the past largely dithered on trade deals fearing an onslaught of imports that could hurt domestic producers, but Indian companies are much more competitive now, partly due to Government incentives like corporate tax cuts and manufacturers’ own initiatives to step up quality and widen their global distribution network, industry leaders said.
According to Ajay Sahai, Director General at the Federation of India Export Organisations (FIEO), representing more than 37,000 exporters. India’s manufacturers in areas including auto components, garments, electronics and jewellery have moved to high-quality products and expanded distribution in North America, as US companies looked at alternatives to China in the past few years.
In the past few years, the Government has rolled out billions of dollars in corporate tax cuts and other incentives for domestic manufacturers to enhance their competitiveness. It has also invested in roads and ports, bringing down costs for companies.
“Our exports to the US would definitely go up if there is a bilateral deal as we have invested in new products, technologies and tied with buyers,” said Pankaj Chadha, Chairman of Engineering Export Promotion Council, and an exporter of engineering goods worth $20 million a year to the US.
Indian manufacturers especially in labour-intensive areas such as textiles, footwear, engineering goods, solar panels, and electronics could particularly benefit from a trade deal, Sahai said, as they do not directly compete with the US Ajay Srivastava, founder of New Delhi think tank Global Trade Research Initiative, said that for nearly 75 per cent of US exports to India, like petroleum products and chemicals, average tariffs are already below 5 per cent, so a trade deal that could scrap duties is unlikely to be a major concern.
