India-US Trade Deal: What are the key terms of the deal? What will become cheaper? Which sectors will benefit the most?
India US Trade Deal: The trade deal between India and the United States, signed on Monday, is being considered a historic turning point for the Indian economy. This mega-agreement was announced after a phone conversation between President Donald Trump and Prime Minister Narendra Modi. This deal is entirely transactional, with both countries granting significant concessions to each other. Here are the key terms of the agreement and the Indian sectors that are expected to benefit the most.
What are the key terms of the deal?
Ban on Oil Purchases from Russia - The most important condition of this deal is that India will no longer buy crude oil from Russia. Instead, India will meet its energy needs from the US and Venezuela.
Significant Tariff Reduction - The US has reduced the retaliatory tariffs imposed on Indian products from 25 percent to 18 percent. Notably, this rate had reached as high as 50 percent some time ago.
Steps towards Zero Tariffs - India has committed to gradually working towards eliminating all tariffs and non-tariff barriers on American products.
$500 Billion in Purchases - Under the ‘Buy American’ policy, India will purchase energy, technology, coal, and agricultural products worth more than $500 billion from the US over the next few years.
A major boost to Indian exports
The reduction in tariffs by the US will provide a major boost to Indian exports. These five sectors, in particular, are expected to benefit the most:
What will become cheaper?
Auto Components - The US is a large market for Indian auto parts companies. A reduction of about 7 percent in tariffs will increase the profits of these companies.
Jewelry and Leather Industry - The reduction in duties on handmade jewelry and leather products will provide significant relief to these labor-intensive industries.
Textiles and Apparel - Lower tariffs will make Indian clothing cheaper in the American market, leading to increased orders and exports.
IT Services and Technology - Increased purchases of high-tech products from the US could provide Indian IT companies with new opportunities for large projects and co-development.
Pharma Sector - The reduction in tax burden on drug exports will further strengthen the hold of Indian generic medicines in the US market.
What will be the impact of the deal?
Market surge - Following the news of this agreement, the GIFT Nifty saw a surge of about 1000 points on Tuesday. Investors expect that this will give a new impetus to India's GDP growth.
A major diplomatic success for India - This comprehensive agreement with the US, after similar agreements with the UK and the European Union, is considered a major diplomatic success for India, especially at a time when the US is adopting a strict stance on its tariff policies.
Experts believe that this deal is not limited to trade alone, but is a major step towards establishing India as America's most trusted economic partner, in contrast to China.