The United States on Wednesday revised the factsheet on the trade deal with India released two days earlier, climbing down significantly on its claims about concessions wrested from New Delhi. The modification allayed apprehensions caused by the February 9 version of the factsheet, and gave more credence to the government’s claims that undue compromises haven’t been made.
It is not immediately clear what prompted Washington to go beyond the February 6 joint statement issued by both countries in the first instance and then retract quickly. The Indian government might have expressed reservations over some of the claims made by the US in the first factsheet.
Regarding India’s import of US merchandise, the revised factsheet merely states that it “intends to” buy “over $500 billion of US energy, information and communication technology, coal, and other products” over five years, tempering the earlier phrase that it is “committed to” such purchases. Also, the new factsheet drops mention of “certain pulses” among the farm goods India has undertaken to reduce or eliminate tariffs on.
On digital trade, the earlier version of the factsheet had mentioned that “India will remove taxes on digital services taxes” and negotiate rules that prohibit the imposition of customs duties on digital transmissions. The new factsheet reverts to the language used in the joint statement, dropping the word “digital tax”. “India committed to negotiate a robust set of bilateral digital trade rules that address discriminatory or burdensome practices and other barriers to digital trade,” the revised factsheet said.
The revised document has also removed four paragraphs on tariff and non-tariff barriers by India, including mention of “restrictions on government procurement” by India and trade distorting and unfair practices of the country’s state-owned enterprises.
After New Delhi withdrew the 2% equalisation levy on overseas e-commerce operators in Budget FY25, it was pinning hopes on an OECD-brokered deal to get its due share of taxes from overseas e-commerce operators including Big Tech. With the US withdrawal casting major uncertainties on the OECD tax deal, experts feel India needs to go back to the drawing board to devise a new effective strategy.
Apart from tariff reduction/elimination of all industrial goods and select agriculture products, the US had imposed several other conditions on India for dropping its extra tariff on India to 18% from 50%.
Indian officials have said that the government is not the buyer; the private sector trades based on its requirements and other factors so a “commitment” on purchases of specific products in specific quantities or value cannot be given.
“In the US, all the key sensitive sectors have been protected. Wherever there is a little sensitivity, we have used tariff rate quota mechanisms to ensure that any market access is limited in nature and it doesn’t impact our farmers,” Commerce Secretary Rajesh Agrawal said in Nuremberg. The key items produced by farmers like cereals, meat and poultry, and the dairy sector, have been completely protected.
On the agriculture trade, the revised sheet now reads that India will eliminate or reduce duties on a wide range of food and agriculture products. The products now mentioned are dried distillers’ grains for animal feed, red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine and spirits and additional goods.
Pulses were not mentioned in the joint statement issued by both countries but were included in the initial factsheet. Currently, a small quantity of yellow peas, red and green lentils and kidney beans is imported from the US, where prices are higher by 5% to 10% compared to those offered by Canada, Russia and Australia. This makes imports of pulses from the US unremunerative.
Prior to the announcement of the deal, a US delegation of senators from pulse-growing areas was in New Delhi in January meeting top officials seeking a reduction in the 30% duties imposed by India from November 1 last year.
While India had removed the 6% levy on payments made to non-resident companies for online advertising and the 2% tax imposed on overseas e-commerce companies and streaming platforms in 2025, agreeing to this in a trade agreement with the US would mean India forfeits the freedom to re-introduce it in the future for American companies.
According to experts, by agreeing not to tax digital services for the US, India could end up putting its local digital developers at a disadvantage at a time when Artificial Intelligence (AI) and related services are exploding.
On government procurement the US has earlier also expressed concern about procurement preferences for Indian micro, small, and medium-sized enterprises and state-owned enterprises. State-owned enterprises have also been singled out regarding conditions like domestic content on purchases. It has also spoken against digital taxation, data localisation and restrictions on e-commerce companies.