India’s talks with the US for a Bilateral Trade Agreement, which would smoothen gross exports worth USD 86.5 billion (FY 2024–25 data, up 11.6 per cent from FY 23–24), are walking on a double-edged sword.
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Image source: Linkedin (Handle: Harnam Prajapati)
With the progression of a second Trump administration, there is a renewed and pressing push for comprehensive trade relations. Current high-level negotiations are underway, with India and the US aiming to finalise an interim three-phase trade agreement by June 25, ahead of a potential July 9 deadline for the USA’s 26 per cent reciprocal tariff on India, which is currently suspended.
While Indian exports still face America’s standard 10 per cent baseline tariff, discussions are focused on securing duty reductions across labour-intensive Indian sectors like textiles, gems and jewellery, leather products, garments, plastics, chemicals, shrimp, oil seeds, chemicals, grapes, and bananas. In return, the US seeks tariff reductions in industrial products, automobiles (especially electric vehicles), wines, petrochemicals, dairy, and agricultural goods such as apples and tree nuts.
“India is prepared to finalise a trade agreement with the US by first addressing low-hanging fruits,” Commerce Minister Piyush Goyal said on Monday on the proposed bilateral trade pact. When asked if it will be low-hanging fruits, he said, “India is always ready for that, and I believe that” the things which are not controversial, the low-hanging fruits, should be captured first as those sectors will start getting profits. Goyal is on an official visit to meet Swiss leaders and businesses here. When asked if something can be concluded before July 9, he said: “I am a born optimist”.
The numbers tell a compelling story. At USD 131.84 billion in bilateral trade, the United States has secured its position as India’s largest trading partner for the fourth consecutive year. China, the former frontrunner from 2013-14 to 2017-18 and briefly in 2020-21, now sits in second place with USD 127.7 billion. But these figures merely scratch the surface of a complex economic relationship that’s currently at a critical juncture.
As India and the US navigate their latest round of trade negotiations, the stakes couldn’t be higher. Sources indicate that an interim trade agreement could materialise as early as June 25, 2025, ahead of the July 9 deadline when the US’s 26 per cent reciprocal tariff on Indian goods is set to kick in. Currently, Indian exports face America’s standard 10 per cent baseline tariff, making this negotiation window crucial for both nations.
The journey to this point has been anything but linear. Post-independence India, under Jawaharlal Nehru’s leadership, embraced protectionist policies and strategic autonomy, limiting economic engagement with the US to programs like PL-480 food aid. The 1974 nuclear test and India’s Soviet alignment further complicated matters. But 1991 marked a watershed moment when India, facing a severe balance-of-payments crisis, dismantled its protectionist framework under PM PV Narasimha Rao and Finance Minister Manmohan Singh.
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