India and the United States have finally signed an interim trade agreement after months of negotiation, debate and apprehension.
Under the terms of the interim agreement, the US will apply a reciprocal tariff rate of 18%, down from 50%, on Indian-origin goods, and India will eliminate or reduce tariffs on all US industrial goods and has also decided to buy $500 billion worth of American products over five years.
Now the focus is on which sectors will be impacted by the major announcement made under the deal with the US, one of the largest export destinations of India.
The big winners and losers, sector-wise
What absolutely stands out are the big winners in this tariff layout – sectors which are going to be lucky with zero tariffs are generic pharmaceuticals, gems and diamonds, and aircraft parts. Sectors likestextiles, apparel, leather and footwear, plastics and rubber, organic chemicals, home décor, artisanal products, and certain machinery are going to face an 18% tariff.
1. Pharmaceuticals
In the latest trade agreement between the two countries, the reduced tariff barriers on Generic Drugs will improve access of Indian pharmaceutical products to the US market, leading to a significant benefit for Indian generic drug manufacturers
2. Aircraft, MRO segment set to gain
The joint framework released by the white house also noted that the US will remove tariffs on certain Indian aircraft and aircraft parts.
Removal of tariffs on aircraft and aircraft parts benefits India’s emerging aerospace manufacturing, maintenance, repair and overhaul (MRO), and component supply ecosystem,
3. Gems and Jewellery
The interim trade deal is expected to support exports from India’s cutting and polishing industry, improving margins and export volumes.
4. Lower reciprocal tariff gives Indian textiles an edge in the US market
Textiles and apparel applications will face a lower tariff of 18%. A lower reciprocal tariff rate will enhance competitiveness for Indian textile and garment exporters in the US market, particularly in labour-intensive segments
5. Plastics, chemicals, home decor among sectors set to gain
The US is also going to lower tariffs on plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.
Reduced trade friction supports exports of industrial machinery, auto components, and fabricated metal products.
In the framework released on February 7, India and the US have reaffirmed their commitment to pursue a full BTA that encompasses goods, services, digital trade, investment cooperation and supply chain resilience.