India-US Trade Agreement Negotiations

April 21, 2025

Recently, India and the United States are advancing towards bilateral trade agreement (BTA). The negotiations are set to begin in Washington, DC, with a focus on an “early tranche” of discussions. This initial phase aims to address a limited set of issues, potentially concluding before the fall deadline. The agreement is structured across 19 chapters, covering vital areas such as digital taxation, tariff reductions, and non-tariff measures.

What is Bilateral Trade Agreement?

The BTA aims to enhance trade relations between India and the US. It seeks to double bilateral trade in goods and services to USD 500 billion by 2030. The agreement is expected to cover various sectors, including agriculture, textiles, and technology. Both countries are keen to establish a framework that facilitates smoother trade and investment.

Early Tranche

An “early tranche” refers to a preliminary phase of the trade agreement. This phase will focus on specific issues like market access for selected goods and the reduction of non-tariff barriers. The goal is to create a foundation for more complex discussions in subsequent phases. It represents a strategic move to leverage the 90-day tariff pause announced by the US.

Importance of the 90-Day Tariff Pause

The 90-day tariff pause allows India to negotiate without immediate pressure from US tariffs. Initially announced by President Trump, this pause excludes tariffs China. It provides India with a unique opportunity to secure trade benefits while avoiding high tariffs that could affect exports.

Terms of Reference and Negotiation Structure

The Terms of Reference (ToRs) outline the scope and objectives of the BTA. They encompass various chapters, including tariffs, customs procedures, and rules of origin. This structured approach aims to streamline negotiations and ensure clarity on the issues at hand.

Key Elements of the Agreement

The BTA encompasses duties on a range of goods. The US seeks concessions in sectors like automobiles and industrial products. India is focused on labour-intensive sectors such as textiles and agriculture. The agreement aims to encourage mutual benefits and enhance trade volumes.

Strategic Significance for India

The trade agreement is crucial for India to protect its exports from potential US tariffs. It also aims to strengthen economic ties and enhance market access for Indian products. The BTA is seen as a pathway to a more balanced trade relationship.

Future Prospects and Negotiation Timeline

The first in-person negotiations are scheduled for April 23, 2025. Previous discussions have laid the groundwork for this meeting. The timeline is ambitious, with both countries aiming to conclude the first phase by fall 2025. Continued engagement will be essential for achieving the desired outcomes.

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