The United States and India announced a new trade deal that is aimed at removing tariff barriers that have been in place for a long time and expanding commercial tie, following a call between U.S. President Donald Trump and Indian Prime Minister Narendra Modi.
Per the deal, the United States will make a very substantial cut in tariffs on a variety of Indian exports, thus bringing reciprocal tariff levels to around 18 per cent and hence resolving previous trade tensions. On its part, India has committed to lowering or eliminating tariffs on certain American products thus giving U.S. exporters greater access to the Indian market.
Energy trade is one of the most important aspects of the agreement. According to the U.S. statements, India has made a commitment to cut back the oil from Russia that it is currently dependent on and to increase the energy imports from the United States, thus indicating a change in the source of supply that is in line with the broader trade agreement.
Officials of both countries stated that the deal is likely to bring benefit to major sectors such as textiles, pharmaceuticals, agriculture, industrial goods and consumer products apart from consolidating economic cooperation at a wider level. Trade bodies in the two countries welcomed the announcement and termed it as a significant step towards reestablishing faith in the bilateral trade relations.
Indian financial markets reacted with enthusiasm to the announcement : equities went upwards and the rupee gained strength in the early hours of trading as investors anticipated better export conditions as well as increased cross-border investment flows.
Though the big picture of the agreement has been disclosed , the officials pointed out that more meetings will be held for the finalization of sector specific rules, timelines for implementation, and details of the regulatory framework. Each government referred to the accord as a major stepping stone for in depth economic cooperation between two countries in the near future.
The pact is also likely to directly affect small and medium sized exporters of both countries, especially in labour intensive segments like textiles, gems and jewellery, food processing and light manufacturing.
Trade specialists reckon that reduced tariffs and easier access to the market might be the ways Indian exporters can once again regain their competitiveness in the US market, whereas US businesses can uncover new prospects in India’s fast-growing consumer market.
Nevertheless, analysts have warned that the actual advantages of the agreement will be determined by the speed with which the tariff reductions are carried out and the extent to which the regulatory procedures are made clear to the enterprises.
