India and the United States are in the final stages of a trade agreement, which could reduce tariffs on Indian exports from 50% to 15–16%. CEA Nageswaran has expressed hope for the removal of punitive duties. The US aims to reduce oil imports from Russia and compensate for China's shortfall, making cheaper energy trade and increased exports possible for India.
50% Tariff: India and the United States are in the final stages of a major trade agreement, under which the hefty 50% tariff on Indian products could be reduced to 15–16%. CEA Nageswaran has indicated the possibility of an additional 25% punitive duty being lifted this year. Due to a decline in China's imports of US corn, America is considering India as a new market. Under the deal, India might reduce its purchase of Russian oil, while receiving concessions in energy trade from the US, which would strengthen commercial ties between both countries.
Potential Concessions on Punitive Duties
During an event at the India Chamber of Commerce in Kolkata, Chief Economic Advisor (CEA) Nageswaran expressed confidence on this issue. He stated that there is a possibility of seeing a resolution for the additional punitive tariff of at least 25% in the next few months. This 25% duty was imposed by the US White House, which had created difficulties for Indian exporters.
Nageswaran indicated that reciprocal tariffs could also decrease. He mentioned that this 25% reciprocal tariff might come down to the 15-16% level. If this happens, it would be an occasion for Indian exporters to celebrate.
Consideration of Reduced Oil Purchases from Russia
Some terms of this trade agreement may include the option for India to gradually reduce its purchase of Russian oil. This step is significant because the additional 25% US tariff was imposed due to Russian oil purchases. According to data, India imports approximately 34% of its crude oil from Russia, while only 10% comes from the US. Furthermore, India may also consider offering some concessions in the agricultural sector.
China's Actions Force US Hand, Benefit India
China's role has been crucial behind this US move in the deal. The US is seeking new buyers for its agricultural products because China has significantly reduced its import of American corn. In 2022, China purchased $5.2 billion worth of corn from the US, whereas this figure dropped to just $331 million in 2024.
In this scenario, India could become an important buyer for the US. India might increase its import of non-GM corn from the US, although the import duty on it is likely to remain at 15 percent. Currently, the corn import quota from the US is 0.5 million tons annually.
Cheaper Oil and Concessions in Energy Trade
According to reports, India may consider allowing ethanol imports and reducing Russian oil purchases under this deal. In return, concessions in energy trade are expected from the US. Government oil companies may be advised to diversify their crude oil sourcing towards the US.
However, the US has not yet agreed to provide oil at Russia's discounted price. But the difference between Russian discounts and benchmark crude oil has significantly narrowed. The gap of $23 per barrel in 2023 has now reduced to just $2 to $2.5. Due to this, Middle Eastern and American crude oil have become competitive.
Potential Impact on India's Exports
In FY2025, India's exports to the US amounted to $86.51 billion. This figure makes the US India's largest export market. According to CEA Nageswaran, the impact of the tariffs was not significant this year because India had already achieved 50 percent of the volume.
However, if these tariffs had persisted, exports to the US could have seen a 30 percent reduction next year. This would have been a major blow to India's total exports and Gross Domestic Product (GDP). This trade deal could help avert such potential setbacks.
