India's Trade with US
Context:
A long-awaited trade deal between India and the US has been announced, lowering the tariff rate on Indian goods from a coercive 50% to 18%.
This comes against the backdrop of the US administration's earlier concerns regarding the high goods trade deficit with India
Key Trade Trends:
India’s goods trade surplus with the US has nearly halved, dropping from $3.17 billion in April to $1.73 billion in November.
Exports to the US declined significantly after the 50% tariffs came into effect in August, particularly in labour-intensive sectors (garments, footwear, and sports goods)
But exports of electronic goods jumped by 22% in November, as they remained outside the tariff net.
India has stepped up imports from the US to bridge the trade gap.
The US has emerged as the 5th largest supplier of crude oil and the 2nd largest supplier of Liquefied Natural Gas (LNG) to India.
It is also a key supplier of LPG, contributing to the >60% of India's requirement that is met through imports.
Policy Reforms & Diversification:
To ease pressure on industries, the Indian government removed the 11% duty on cotton (aiding the textile chain) and rolled back numerous Quality Control Orders (QCOs) that impacted MSME competitiveness.
India has opened its nuclear sector to foreign investments, aligning with the US push for small-scale reactors.
To mitigate risks, India is aggressively pursuing trade deals with the European Union, Oman, GCC, and the Russia-led Eurasian Economic Union (EAEU).