India To Have Trade Deficit With US From Next Year; To Remove Non-Tariff Barriers On Agri Imports

Chennai: Going by the joint statement on the interim framework on trade deal released on Saturday, India’s trade surplus with the US will turn into a trade deficit as it will have to buy goods worth $100 billion every year for the next five years. The framework hinted at India lifting its non-tariff barriers on agricultural and dairy products.

The framework statement issued by the White House said that India intends to purchase $500 billion of U.S. energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.

In FY25, the US imports into India stood at $48 billion and exports to the US $86.5 billion. The $100 billion imports per year will double the imports from the US and make India’s trade balance swing from surplus to deficit. From next year, India will have a trade deficit with the two large economies – the US and China.

“Recognizing the importance of working together to resolve long-standing concerns, India also agrees to address long-standing non-tariff barriers to the trade in U.S. food and agricultural products,” it said. The removal of non-tariff barriers on food and agricultural products can lead to entry of genetically-modified foods like maize, soya bean, cotton and corn as well as dairy products of cows fed on animal feed. However, the framework did not specifically mention these products.

“India will eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products,” the framework said without specifying which the additional products are.

India also has agreed to address the digital trade rules. “The United States and India commit to address discriminatory or burdensome practices and other barriers to digital trade and to set a clear pathway to achieve robust, ambitious, and mutually beneficial digital trade rules as part of the BTA,”, the statement said.

Among the gainers, tariffs on certain aircraft and aircraft parts will be exempted from the sectoral tariffs of 50 per cent on steel and aluminium. However, steel and aluminium will continue to have sectoral tariffs. India will also receive a preferential tariff rate quota for automotive parts, subject to sectoral tariffs of 25 per cent. However, in the trade deal with the UK, the tariffs on steel and aluminium were brought down to zero, and the first 1,00,000 vehicles exported by the UK each year to the US are subject to 10 per cent tariffs. Gems and diamonds will enter the US without duty. However, jewellery will still attract reciprocal and MFN tariffs.