The US-India joint statement on the framework for an interim bilateral trade agreement—a process that was initiated a year ago—is the ninth deal since the ruling dispensation came to power in 2014. Out of all these agreements, those with the European Union and the US are the big-ticket deals with the world’s most powerful economies, which have taken India out of its comfort zone in lowering tariffs and other barriers while holding firm on its agricultural red lines. The US is lowering tariffs from 50% to 18% in exchange for India stopping purchases of Russian oil, reducing its duties on 98-99% of its industrial items to zero from 13.5%, and committing to buy over $500 billion of energy products, aircraft and aircraft parts, technology products, and expanding joint technology cooperation over the next five years.
Russian Oil Trade-Off
Considering the vicissitudes it has experienced over the last year, this interim deal is best read not as a grand bargain but as a calibrated holding operation. It buys time, eases frictions, and keeps the comprehensive strategic partnership with the most powerful economy in the world on track. To leverage accessing a $30-trillion US economy, India has no doubt had to pay a visible price in the form of reduced autonomy. India will find it difficult to buy cheaper Russian oil that met 36% of its requirements of 5 million barrels of oil a day since 2023. The interim agreement states that India has committed to stop directly or indirectly importing Russian Federation oil. The message is loud and clear: either give up such purchases or risk re-imposition of secondary sanctions.
Defending the Hinterland
True, India has the sovereign right to access oil from any source, but this deal entails purchases of US energy products including sourcing from Venezuela. While India will allow US industrial products at zero duty, its biggest gain is the competitive 18% tariff boost for labour-intensive exports of textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home décor, and artisanal products. India will also get the same relief granted to other countries that have inked deals with the US on aircraft and aircraft parts and a quota for auto part imports that will be subject to lower tariffs.
However, what stands out in the negotiation process is that India held firm on its agricultural red lines that left out wheat, rice, sugar, and dairy and resisted US pressures for lowering duties on genetically modified maize and soya bean which are not allowed under Indian regulations. But it has had to open up on animal feed, tree nuts, fresh and processed fruits, soya bean oil, wine and spirits, some of which—like walnuts and shelled almonds—are either not produced at all or only in limited quantities.
Any negotiation entails a process of give and take for each other’s market. We can certainly push the US for more access for our high-value horticultural crops like bananas, mangoes, grapes, and pomegranates in exchange for lower duties on apples, cranberries, and blueberries. Being a demandeur in negotiations suggests a different construction to reflexively defend agriculture at all costs. Even if India had to concede on tariffs, there is much to be gained by deepening the comprehensive strategic partnership as there is a lot that the US as a tech superpower can do to facilitate India’s transition to become a developed nation.