Half of India’s exports to US could turn duty-free under interim trade deal

India US trade deal to make half of India's exports duty free

• India's $14 billion exports to US may get zero duties under new trade agreement
• Nearly half of India's $44 billion US exports could be duty free after the deal
• Tariffs on Indian goods dropped to 25 percent, with further cuts expected soon

Did our AI summary help?

India’s exports worth nearly $14 billion to the United States are expected to attract zero duties once the interim trade agreement between the two countries is finalised, sources told Moneycontrol. This will be over and above roughly $30 billion worth of goods — including smartphones, select electronics and pharmaceutical products — that already enter the US duty free, potentially taking the total share of duty-free exports to nearly half of India’s shipments to the American market.

“Nearly half of India’s $44 billion worth of exports are expected to get duty free,” commerce and industry minister Piyush Goyal said at a press conference on February 7, indicating the scale of tariff relief anticipated under the evolving trade framework.

Details are yet to emerge on the transition to zero duty rates for these products. It is not clear whether these will kick in once the deal comes into effect or will be applied gradually.

Tariffs on Indian goods were lowered to 25 percent following an executive order issued by the United States on February 6, which removed an additional duty earlier imposed in connection with India’s purchases of Russian oil. The order noted that India had committed to reducing such imports, expanding purchases of US energy products, and strengthening defence cooperation over the next decade.

Russia’s share in India’s oil purchases had declined to a three year low of 24 percent in December from 34 percent the previous month.

A further reduction in tariffs to 18 percent is expected through another executive order, which the government anticipates in the coming days. “The executive order for the 25 percent additional levy has been removed already through an executive order via the US. The drop to 18 percent will happen by next week via another executive order by US,” Goyal said.

The expected duty-free access spans a broad range of products. Agricultural exports such as spices, coconut, tea, coffee and cashew nuts are likely to attract zero duties, along with processed food items including bakery products, cocoa and cocoa preparations, processed fruits, jams and juices.

Industrial exports are also set to benefit. Aircraft parts, machinery components, generic pharmaceuticals, other pharma products, basic auto components, gems and diamonds are expected to receive duty-free treatment once the interim arrangement is operational. Paper, plastics and natural rubber products are also likely to gain similar access.

The deal, expected to be signed in March, could significantly improve India’s export competitiveness in the US market by reducing tariff costs across both labour-intensive and high-value industrial sectors.