While the fruition of the much-awaited India-US trade deal has lifted sentiments across markets and business circles, a great deal of anxiety still persisted due to scant details of the agreement, and a lack of homogeneity between the statements made by the US side, and what officials indicated here.
Announcing the deal on Monday, US President Donald Trump claimed that India agreed to reduce trade barriers to “zero” and “stop” buying Russian oil. He also said New Delhi pledged to purchase more than $500 billion worth of American goods, such as energy, technology, agriculture and coal products, without specifying a timeframe for this.
A blanket reduction of India’s tariffs to zero is clearly implausible given its domestic vulnerabilities, especially in the agriculture sector.
Later, US Agriculture Secretary Brooke Rollins said in a social media post that the deal would ensure more shipments of American farm products to “India’s massive market”.
Addressing the media on Tuesday, however, Commerce and Industry Minister Piyush Goyal said India “protected” dairy and farm sectors under the deal.
India’s simple average import tariff on an MFN basis was around 16% before the latest Budget, while for agriculture products, the average was 36.8%. The weighted average rate for farm products was even higher at 64.3%.
Experts reckon that New Delhi might have agreed to provide concessional-duty import quotas for certain US agriculture products, such as maize, cotton, soyabean, apples etc. The size of these quotas and if floor prices have been agreed to will determine the impact of such relaxations on the domestic farming community, they felt.
Importantly, the Kremlin said on Tuesday that it hadn’t had any intimation from India about a halting of oil purchases. Sources from the energy sector and agencies tracking oil cargo movements also discounted chances of an abrupt halt to India’s purchases of Russian oil, although an ongoing winding down of these shipments might now gather additional pace.
Adaptability of Indian refineries
Indian refineries would need time to ready themselves for higher diversification of crude sourcing, they felt. India’s defence ties and long-time diplomatic alliances with Russia, and trade economics could also stand in the way of bringing oil imports from that country to a complete halt. With discounts widening, Russian oil is now available at a $10 per barrel lower than India’s weighted crude basket.
Besides, though Trump said India would buy “much more oil from the United States and, potentially, Venezuela,” experts noted that since the Venezuelan crudes are heavy and sour, most Indian refiners would find it difficult to process them.
Digital services tax on overseas e-commerce?
It also remains to be revealed if India has offered to desit from imposing a digital services tax on overseas e-commerce operators. After New Delhi withdrew the 2% equalisation levy on overseas e-commerce operators in Budget FY25, it was pinning hopes on a OECD-brokered deal to get its due share of taxes from overseas e-commerce operators including the Big Tech.
With the US withdrawal having cast major uncertainties on the OECD tax deal, India was expected to go back to the drawing board again to devise a new effective strategy.
Concerns are also about any possible dilation of the public safeguards built into India’s patenting regime, and climb down from its long-standing position at the WTO against a permanent moratorium for customs duties on electronic transmissions.
Trade policy think tank GTRI said: “India should not rush to celebrate President Trump’s trade announcement. The Truth Social post leaves major questions unanswered—what products are covered, what the timelines are, and
whether India has really agreed to zero tariffs and zero non-tariff barriers, especially in sensitive
areas like agriculture and regulated imports.” The headline figure of $500 billion in US purchases is also unclear. India currently imports less than $50 billion a year from the US.