Source : The Hindu
A. Issue in Brief
- India and U.S. moved toward an interim trade deal (2025–26) after prolonged tariff tensions; comes when bilateral trade already crossed ~$190–200 billion (FY24, USTR/GoI data), making U.S. India’s largest trading partner.
- U.S. imposed 25% tariff hikes on select imports and an additional 25% tariff threat linked to Russian oil purchases, blending trade policy with geopolitical leverage.
- U.S. cuts tariffs to 18% on Indian goods; India reportedly indicated ~$500 billion purchase intentions over 5 years in energy, defence, and tech, aimed at narrowing the U.S. trade deficit and stabilising ties.
- Domestic debate intensified due to possible concessions on agriculture, GM foods, and NTBs, raising farmer-income and food-security concerns.
Relevance
- GS-II (International Relations)
- India–U.S. bilateral relations
- Trade diplomacy and strategic autonomy
- Geoeconomics and foreign policy
B. Static Background
Trajectory of India–U.S. Trade
- Bilateral goods & services trade:
- ~$120 bn (2016) → ~$191 bn (2023–24)
- Target often discussed: $500 bn by 2030 (joint ambition statements).
- U.S. accounts for ~18% of India’s exports (largest single-country destination), especially in IT services, pharma, gems & jewellery, engineering goods.
- India runs a goods trade surplus (~$30–35 bn) with the U.S., a recurring U.S. concern.
Disputes
- GSP withdrawal (2019) affected ~$6 bn of Indian exports.
- Section 232 (steel/aluminium) and 301 tariffs created friction.
- Multiple disputes filed at WTO (e.g., ICT products, steel tariffs).
C. Key Dimensions
1) Tariffs & Market Access
- U.S. average applied tariffs:
- ~3–4% overall, but higher on specific sectors (textiles, footwear, agri).
- India’s average tariffs:
- ~17–18% (WTO data); higher in agriculture (30–40%+ in some lines).
- Interim deal discussions focus on:
- Lower Indian duties on nuts, apples, medical devices, select agri.
- Better U.S. access for Indian textiles, leather, and engineering goods.
Example: Earlier tariff cuts on U.S. almonds and apples were used as confidence-building measures.
2) Agriculture Sensitivity
- Agriculture supports ~45% of India’s workforce but contributes ~15–16% of GDP → high livelihood sensitivity.
- U.S. provides large farm support:
- $20–30 bn annually in farm subsidies (OECD estimates vary by year).
- Creates price competitiveness against Indian smallholders.
- India’s red lines:
- Dairy, cereals, pulses, edible oils, and GM foods.
Example: India kept dairy largely out of RCEP, showing consistent defensive stance.
3) Energy & Strategic Trade
- U.S. already among India’s top LNG suppliers:
- U.S. share in India’s LNG imports rose from ~5% (2017) to ~15%+ in some recent years.
- Russian oil:
- Share in India’s crude imports jumped from <2% (pre-2022) to ~35–40% in 2023–24 due to discounts.
- Linking tariffs to Russian oil purchases introduces geoeconomics into trade, potentially constraining India’s diversification strategy.
4) Non-Tariff Barriers (NTBs) & GM Foods
- U.S. repeatedly flags India’s SPS measures and lengthy approvals as NTBs.
- India restricts GM food imports citing:
- Biosafety
- Environmental risks
- Farmer dependency on patented seeds
Example: GM mustard debate in India shows domestic sensitivity to biotech crops.
D. Critical Analysis
Opportunities
- Improved access to U.S. market benefits:
- Textiles & apparel (~$10 bn+ exports to U.S.)
- Pharmaceuticals (U.S. takes ~30–35% of India’s pharma exports)
- Energy deals diversify supply and support India’s role as a major energy consumer economy.
- Trade cooperation complements strategic ties in QUAD, iCET, semiconductor and defence tech cooperation.
Risks
- Import surges can depress prices for MSP-backed crops:
- Example: edible oil import liberalisation earlier hurt domestic oilseed farmers.
- Policy space erosion:
- FTAs may constrain future use of tariffs for infant industry protection.
- Strategic autonomy:
- Trade conditionalities on energy sourcing blur line between commerce and geopolitics.
- Asymmetric bargaining:
- U.S. GDP ~$27 trillion vs India ~$4 trillion → power imbalance in negotiations.
E. Way Forward
- Use tariff-rate quotas (TRQs) for sensitive agri products.
- Strengthen domestic competitiveness via logistics, storage, and value chains rather than only tariffs.
- Institutionalise stakeholder consultations with states & farmer bodies before commitments.
- Diversify export destinations to avoid overdependence on a single market.
- Separate trade diplomacy from geopolitical pressure points to preserve autonomy.
F. Exam Orientation
Prelims Pointers
- U.S. = India’s largest trading partner.
- GSP withdrawal – 2019.
- WTO terms: AoA, SPS, TBT often tested.
- Section 232/301 = U.S. unilateral trade tools.
Mains Practice Question (15M)
- “India’s trade negotiations increasingly reflect a balance between export ambition, farmer protection, and strategic autonomy.”Examine in the context of recent India–U.S. trade developments.
