India, US to negotiate new trade pact to cut non-tariff barriers

India and the US plan to discuss a new trade pact and both sides will focus on increasing market access, reducing import duty and non-tariff barriers, the government said on Tuesday.

Union Minister of State for Commerce and Industry Jitin Prasada told the Lok Sabha that reciprocal tariffs have not been imposed by the US on India thus far. "Both countries plan to negotiate a mutually beneficial, multi-sector bilateral trade agreement. Both countries will focus on increasing market access, reducing tariff and non-tariff barriers, and enhancing supply chain integration," he said.

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India-US trade ties

When Prime Minister Narendra Modi visited Washington last month, India and the US announced their commitment to more than double the two-way commerce to USD 500 billion by 2030. They also agreed to negotiate the first tranche of a bilateral trade agreement.

In 2023, US-India bilateral trade in goods and services stood at USD 190.08 billion (USD 123.89 billion in goods and USD 66.19 billion in services trade). That year, India's merchandise exports to the US stood at USD 83.77 billion, while imports were USD 40.12 billion, leaving a trade gap of USD 43.65 billion in favour of India.

In 2021-24, America was India's largest trading partner. The US is one of the few countries with which India has a trade surplus.

Trump’s claim on tariffs

Prasada said India continues to engage with the US to broaden bilateral trade ties in a mutually beneficial and fair manner. "This is an ongoing exercise and Indian exporters are working towards diversifying trade baskets and export destinations," the minister said.

Commerce Secretary Sunil Barthwal on Monday told a parliamentary panel that negotiations between India and US were still on and no agreement on trade tariffs had been reached so far.

US President Donald Trump has claimed that India has agreed to reduce its tariffs "way down".

Streamlining tariff structure

In a separate reply, the minister said India's tariff policy aims to regulate trade, protect domestic industries and generate revenue through taxes on imported and exported goods.

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"Recent reforms have focused on streamlining the tariff structure and facilitating trade," Prasada said.

India is a member of the World Trade Organisation (WTO) and bound to its maximum tariff that can be applied on a product category. The applied tariffs are generally below the bound tariff for a given commodity line.

"With the changing trade scenario, India is moving towards having Preferential/Free Trade Agreements wherein customs tariffs and non-tariff barriers are reduced or eliminated on substantial trade between the PTA/FTA members," the minister added.