India-US Trade Pact Unveils Sector-Specific Market Access Strategy
The Indian government announced on Monday a comprehensive trade agreement with the United States, strategically designed around product sensitivity. Under this pact, India will implement quota-based duty concessions for the automobile sector while offering market access to alcoholic beverages through tariff reduction and minimum import price-based formulations. This move aims to balance liberalization with protection for sensitive industries.
Substantial Tariff Reductions Boost Export Competitiveness
According to the government, the agreement will reduce tariffs on $30.94 billion of India's exports from 50 percent to 18 percent. Additionally, reciprocal tariffs on another $10.03 billion will be eliminated entirely. "This means a substantial share of Indian goods entering the US market will now face either sharply lower tariffs or completely duty-free access, significantly improving price competitiveness," the government stated.
In a significant win for agriculture, $1.36 billion of Indian agricultural exports will receive zero additional US duty access. Key beneficiary products include spices, tea, coffee, fruits, nuts, and various processed foods.
Sectoral Gains Across Textiles, Gems, and Agriculture
The agreement details specific gains across multiple sectors:
- Textiles: Tariffs on textile exports will be cut from 50 percent to 18 percent, with silk receiving nil duty access. This opens opportunities in the US textile market valued at $113 billion.
- Gems and Jewellery: Tariffs for this sector will also fall to 18 percent, providing preferential access to a US market valued at $61 billion. Zero percent duty market access has been secured for major categories including diamonds, platinum, and coins, covering a $29 billion market.
- Key Export Segments: Expected gains include cut and polished diamonds, lab-grown synthetic diamonds, coloured gemstones, synthetic stones, and articles made of gold, silver, and platinum.
Sensitive sectors have been addressed with tailored mechanisms. Automobiles are liberalized through a mix of quota and duty reduction, with no duty concessions granted on electric vehicles to the US. Medical devices are under long, staggered phasing schedules, while precious metals and other sensitive industrial products are managed through quota-based tariff lowering.
Agricultural Access Structured by Sensitivity
India maintains a $1.3 billion trade surplus in agricultural trade with the US, with exports of $3.4 billion and imports of $2.1 billion in 2024. Market access has been structured based on product sensitivity, incorporating various mechanisms:
- Immediate Duty Elimination: Offered only for select non-sensitive products already liberalized under other FTAs.
- Phased Elimination: Up to 10 years for certain intermediate food processing inputs like albumins, coconut oil, and castor oil.
- Tariff Rate Quotas (TRQs): For highly sensitive items like in-shell almonds, walnuts, pistachios, and lentils, allowing limited quantities at reduced duties.
- Full Protection: Highly sensitive sectors including meat, poultry, dairy products, GM food products, soyameal, maize, and cereals remain fully protected under an exemption category.
Beneficiary agricultural items under zero additional duty include spices, tea, coffee, copra, coconut oil, cashew nuts, chestnuts, avocados, bananas, guavas, mangoes, kiwis, papayas, pineapples, mushrooms, cereals like barley and canary seeds, bakery products, cocoa preparations, sesame and poppy seeds, and processed foods such as fruit pulp, juices, and jams.
Industrial Goods and Digital Trade Framework
For industrial goods, the agreement secures zero additional duty access for exports valued at $38 billion. India will gain zero reciprocal duty access in key categories including gems and diamonds, platinum and coins, clocks and watches, essential oils, inorganic chemicals, paper articles, plastics, wood products, and natural rubber.
Market access for American industrial goods has been structured strictly based on product sensitivity, combining immediate tariff elimination, phased reduction of up to 10 years, and quota-based access.
In digital trade, India's digitally delivered services exports stood at $0.28 trillion in 2024, growing 10.3 percent year-on-year. India ranks fifth globally in digitally delivered services exports and eleventh in imports, while the US ranks first in both categories. "A structured digital trade framework between the two countries reduces regulatory uncertainty, lowers compliance friction, and facilitates smoother cross-border service delivery," the government emphasized.
The agreement reflects India's calibrated approach to trade liberalization, ensuring competitive gains while safeguarding sensitive sectors through mechanisms like quotas, phased reductions, and minimum import prices.
