Editorial: A big trade deal on the horizon?

India and the US are likely to conclude the first tranche of a bilateral trade agreement in the coming months. Surrounding this statement are a few high-profile events – from Prime Minister Narendra Modi’s visit to the White House, followed by Commerce Minister Piyush Goyal’s and Finance Minister Nirmala Sitharaman’s ongoing US visit to US Vice President JD Vance’s India visit. The nitty-gritty work was reportedly done during prolonged discussions between Indian negotiators and their US counterparts – both in person and virtually. At stake is the first of the two tranches of an agreement that aims to achieve an ambitious target of $500 billion bilateral trade by 2030, as against $129 billion in 2024 with India enjoying a $45.7 billion surplus.

The two countries are keen on hammering out a deal by this autumn but it is not going to be a cakewalk for either side. The US is facing pressure from global community’s response to its aggressive tariff announcements while India wants to sort out issues with the superpower without giving away too much in the bargain. In fact, some analysts feel under the present circumstances the US might factor in India’s options vis-a-vis Russia, China and EU. India had some tightrope walking during the Biden era by maintaining business and diplomatic relations with both the US and Russia in the wake of Ukraine conflict. In the process, it benefitted from oil imports from Russia. Since the tariff war began, China has been making overtures to India, which the latter can subtly use to its advantage. But then, the US as a superpower being headed by a temperamental, businessman-turned-politician who has to cater to his nationalistic domestic constituency will be a tough bargainer who possibly has some winning cards up its sleeve.

India has already made some soft moves obviously to appease the US. Besides pre-emptively lowering tariffs on some products, India has also increased import of crude oil and liquefied natural gas and high-tech defence platforms and equipment from the US to reduce the latter’s trade deficit. This is likely to work in favour of India. But, for India there are some obstacles on the path and the most difficult one relates to the US demand for duty concessions for export of diary and agricultural items to India, which could have an adverse impact on India’s already ailing farming sector. Can India and its teeming army of small and poor farmers be able to compete with the highly commercial, mechanised, large-scale farming by the US? Indian farmers have been up in arms when the Centre tried to inject commercialisation into Indian farming and had to beat a slow retreat. India will have to calculate all the associated risks and how it would deal with them in the coming years. Especially, when the global trade and diplomatic scene is fluid and could change course in unpredictable ways.

For now the optics seem good as both the countries are making public announcements about negotiating a mutually beneficial, win-win deal. Both want to expand trade and investment. India is looking to benefit from the disruptions caused by Trump’s tariff war. Ironically, both countries are constrained by similar domestic compulsions – that is, contend with politically sensitive constituents (farmers and indigenous businesses) and the political and ideological commitment to strengthen the “make in the country” policy. The Vance visit is possibly good optics and messaging, at least for now.