Clipped from: https://www.thehindubusinessline.com/opinion/a-win-win-trade-deal-with-us/article70616598.ece
It will make our exports more competitive, and deliver gains to labour-intensive manufacturing units
The India-US trade agreement significantly enhances market access, lowers tariffs, and improves investor confidence | Photo Credit: VIJAY SONEJI
Over the past decade India has adopted a coherent strategy of entering into bilateral trade agreements with key partners and major economies to increase trade diversification and the competitiveness of India’s exports. This period has seen India entering into Free Trade Agreements (FTAs) with Mauritius, the UAE, Australia, European Free Trade Association (EFTA), the UK and the European Union. The India-US bilateral trade agreement is the latest in this series and marks a significant milestone which will instil confidence among businesses and provide certainty for investors.
During 2024-25 India’s merchandise exports to the US stood at $86.5 billion which comprised around 20 per cent of India’s overall merchandise exports of $437.7 billion. In terms of composition, the major exports included electrical machinery, gems and jewellery, pharmaceutical products, textiles and apparels, chemicals and marine products. Before this agreement, Indian exports worth $40.96 billion to the US were subject to reciprocal tariffs of as high as 50 per cent. The agreement now reduces the tariff to a competitive 18 per cent on a major part of exports ($30.94 billion), while tariffs on another $10.03 billion worth of exports to the US have now been reduced from 50 per cent to zero.
The agreement would make India’s exports to the US more competitive since the tariff differential favours India. Tariffs on other countries such as China (35 per cent), Vietnam (20 per cent), Malaysia (19 per cent), Indonesia (19 per cent), the Philippines (19 per cent), Cambodia (19 per cent) and Thailand (19 per cent) remain higher than on India.
From a sectoral perspective, the India-US bilateral trade agreement delivers substantial gains across a wide range of labour-intensive and value-added manufacturing exports by sharply reducing tariffs from 50 per cent to 18 per cent, with zero-duty access for select products. In textiles and apparel, including silk, improved access to a $113 billion US market is expected to boost exports, strengthen small businesses and production clusters, and generate employment across diverse product categories. Similar benefits accrue to leather and footwear, gems and jewellery, home décor and toys, where lower tariff enhances India’s competitiveness in large US consumer markets and supports MSME-led manufacturing growth.
In machinery and parts, reduced tariffs open opportunities in a $477 billion US market, strengthening India’s presence in value-added industrial exports. Collectively, these sectoral gains reinforce India’s role as a reliable supplier in global value chains while advancing scale, productivity and employment in domestic manufacturing. Significantly, India’s agricultural products valued at $1.035 billion have been assured of zero reciprocal tariff which will benefit Indian farmers and exporters.
Safeguards embedded
The agreement incorporates adequate safeguards through a carefully calibrated market access framework shaped by extensive stakeholder consultations with industry, sectoral associations and line ministries. Liberalisation of industrial goods has been strictly guided by product sensitivity, combining immediate tariff elimination with phased reductions and quota-based access where required. Sensitive sectors such as automobiles, medical devices and precious metals have been protected through quotas, duty reduction mechanisms and long, staggered phasing schedules, ensuring that enhanced market access strengthens competitiveness without undermining domestic manufacturing capacity or employment. At the same time, highly sensitive agricultural products remain fully protected.
The India-US bilateral trade agreement dovetails closely with India’s broader strategy of creating an enabling ecosystem for a globally competitive manufacturing sector. Policy emphasis has increasingly shifted towards aligning private and social costs of production through targeted interventions wherever market failures or externalities exist. By internalising costs related to infrastructure gaps, logistics inefficiencies, regulatory frictions, and skill mismatches, these measures aim to correct distortions that weaken firm-level incentives and economy-wide efficiency. Importantly, many of these interventions address bottlenecks at their source, such as higher logistics costs, regulatory burden, and high compliance burdens, thereby improving competitiveness not through ad hoc support, but through durable improvements in the underlying production environment.
Flagship initiatives such as the Production-Linked Incentive schemes incentivise scale, technology adoption, and export competitiveness across key manufacturing sectors, while the labour reforms, through the consolidation of multiple labour laws into simplified labour codes, are designed to enhance flexibility, formalisation, and productivity. At the same time, ongoing deregulation and rationalisation of non-financial compliances are improving ease of doing business. Together, deeper trade engagements and these domestic policy measures reinforce each other, positioning India as a reliable manufacturing and supply-chain partner in a rapidly reconfiguring global economic landscape.
From a broader economic strategy point of view, the trade agreements which have been negotiated form a key pathway to Atmanirbhar Bharat. A substantial proportion of India’s imports consist of raw materials, intermediate products and capital goods which form a critical component of domestic production for both exports and consumption at home. Such imports include advanced technology imports which are increasingly required in emerging fields such as AI data centres. In this context, growth of India’s electronics exports, including smartphone exports, are an important example of how learning and communities of industrial practice can be fostered through an enabling policy environment leading to productivity gains and a higher share of global exports.
Quality control
Similarly, the Government’s balanced and adaptive approach to quality regulation, reflected in the recent recalibration of Quality Control Orders (QCOs), complements India’s trade strategy by aligning domestic standards with global market requirements while avoiding excessive compliance costs. This flexibility ensures that quality regulation strengthens manufacturing capabilities and export readiness without constraining firms, thereby positioning standards policy as a strategic enabler of competitiveness
Over the past decade, India’s trade strategy has combined deepening bilateral agreements with domestic manufacturing reforms to boost export competitiveness and diversification. The India-US trade agreement significantly enhances market access, lowers tariffs, and improves investor confidence. Supported by enabling domestic ecosystem, this integrated approach strengthens India’s manufacturing capacity, employment generation, and global supply-chain integration leading to a win-win situation and mutually beneficial trade.
Dev is Chairman, Economic Advisory Council to the Prime Minister (EAC-PM), and Bhullar is PS to Chairman, EAC-PM
Published on February 11, 2026
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