US deal unlocks $30-trn market for India; to buy $500 bn worth of US goods in 5 years

New Delhi: Union Commerce and Industry minister Piyush Goyal said almost every farm commodity that India produces in respectable volumes has been kept out of the India-US trade deal, so farmers and dairy are protected and the pact still opens a sharper edge for Indian exporters.

Speaking at a press conference on Saturday, Goyal announced a major reset in India-US trade ties, confirming that steep American tariffs on Indian imports have been slashed from 50 per cent to 18 per cent, effective from noon on February 7. The move follows a framework interim trade agreement between the two countries under the broader India-US Bilateral Trade Agreement (BTA), aimed at boosting exports, jobs and market access. The trade deal will formally be signed in March.

Goyal said India has granted the United States selective access to its market under the landmark trade agreement, allowing certain products to enter duty-free while carefully protecting domestic interests.

He described the deal as a calibrated approach aimed at boosting trade and accelerating economic growth. “This agreement will provide an opportunity to take India’s economy forward at a faster pace,” he said, adding that the pact ensures that the country’s 140 crore citizens will benefit and celebrate its success.

The first phase of the pact is expected to be signed by mid-March. Implementation of the pact will lead to concessions and the elimination of duties on American goods by India. The US, through a separate executive order, has eliminated the 25 per cent tariffs on India for purchasing Russian oil from February 7, as New Delhi has committed to stopping directly or indirectly importing oil from Moscow.

President Donald Trump’s order has said that the US officials will monitor whether India resumes directly or indirectly importing Russian oil.

If it finds that India has resumed directly or indirectly importing the oil, the US officials shall recommend “whether and to what extent I should take additional action as to India, including whether I should reimpose the additional ad valorem rate of duty of 25 per cent on imports of articles of India,” the order said.

The reciprocal tariff of 25 per cent will be reduced to 18 per cent after the US issues an executive order in this regard, which is expected soon.

The statement also said that India has expressed its intention to purchase USD 500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years.

“The US and India are pleased to announce that they have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade,” it said.

On the development, Prime Minister Narendra Modi said the interim trade pact will strengthen ‘Make in India’ by opening up new opportunities for farmers and entrepreneurs, and create jobs for women and youngsters.

Piyush Goyal said the interim pact will open a USD 30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen, as the US duties on Indian goods will come down to 18 per cent from 50 per cent earlier.

Under the deal, several US products will now enter India with zero duties, including Distillers Dried Grains with Solubles (DDGS), a feed product widely used in animal husbandry.

A few wines and spirits have also been allowed, with adjustments such as the establishment of minimum import prices for alcoholic beverages.

Cosmetics have been opened to increase competition, while many computer-related products, still largely imported from abroad, have received concessions to ease market entry.

Goyal emphasised that all these openings were selective and carefully calibrated, designed to balance trade opportunities with the protection of domestic industries, reflecting India’s strategic approach in the negotiations.

Some of the key details, given out by the minister, about the India-US trade deal are:

The US has lowered import duties on Indian goods from a punitive 50 per cent to 18 per cent, offering immediate relief to exporters. Goyal said the revised tariffs will restore India’s competitiveness in its largest export destination after months of elevated levies that strained trade flows.

The two countries have agreed on a framework for an interim trade pact focused on reciprocal and mutually beneficial outcomes. The arrangement serves as a stepping stone to a comprehensive Bilateral Trade Agreement (BTA). The tariff cut is expected to significantly benefit labour-intensive Indian industries such as textiles, apparel, leather, footwear, plastics, rubber goods, organic chemicals, home décor, handicrafts and select machinery. Lower duties are likely to improve price competitiveness and expand order volumes from American buyers.

Under the agreement, tariffs will be eliminated entirely for several high-value Indian exports, including generic pharmaceuticals, gems and diamonds, and certain aircraft parts. These concessions are expected to deliver tangible gains for Indian manufacturers and reinforce the government’s ‘Make in India’ manufacturing push.

India will receive a preferential tariff-rate quota for automotive components, aligned with US national security rules.

As part of the interim framework, India will eliminate or reduce tariffs on all US industrial goods and a wide range of American agricultural and food products. These include animal feed, tree nuts, fruits, soybean oil, wine and spirits, with some duties scrapped immediately and others phased out over time.

Goyal noted that India’s core agricultural interests remained fully safeguarded in the negotiations. No genetically modified (GM) products from the United States will enter India, addressing one of the government’s top concerns.

Contrary to initial fears, the agreement does not open up the entire agriculture sector. Staples and commodities produced in abundance, such as maize, rice, wheat, millets, ragi, bananas, citrus fruits, kabuli chana, sugar, soyabean, and cereals, are not part of tariff concessions.

Sensitive sectors including meat, poultry, dairy products, ethanol, and tobacco were also excluded from the deal, reflecting India’s careful approach in balancing trade opportunities with domestic protection.

Further, Goyal stressed that the agreement does not harm the interests of farmers, MSMEs, or the handloom and handicraft sectors, ensuring that India’s key economic stakeholders remain shielded even as trade is expanded.

At the same time, the agreement provides significant openings for Indian exports. Several agricultural and horticultural products--including tea, spices, coffee, coconut oil, vegetable wax, areca nuts, chestnuts, avocado, guava, mango, kiwi, papaya, pineapple, mushrooms, vegetable roots, barley, bakery products, cocoa products, sesame seeds, and poppy--will now enter the US market with zero additional tariffs.

Beyond agriculture, the deal also extends zero duties to pharmaceuticals worth $13 billion and smartphones, while keeping India’s overall tariff profile lower than competitors such as China, Bangladesh, and Vietnam. These provisions are expected to enhance the competitiveness of Indian products in global markets and open new avenues for exporters.

During 2021-25, the US was India’s largest trading partner in goods. The US accounts for about 18 per cent of India’s total exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade. In 2024-25, the bilateral trade touched USD 186 billion (USD 86.5 billion exports and USD 45.3 billion imports).

With America, India had a trade surplus -- or the difference between imports and exports -- of USD 41 billion in 2024-25. It was USD 35.32 billion in 2023-24 and USD 27.7 billion in 2022-23.

Goyal added that India’s exports worth about USD 44 billion to the US will enter the American market at zero reciprocal tariffs under the agreement. While Indian goods worth about USD 30 billion will continue to attract an 18 per cent tariff (which includes goods from the labour-intensive sectors), there will be no change in duties on goods worth USD 12 billion (including steel, copper and certain auto parts).