An interim framework for a trade agreement worth $500 billion (about Rs 45,29,069.80) has been agreed upon between India and America. This agreement is not only a new chapter in the economic relations between the two countries, but also a big opportunity for Indian exporters to increase their penetration in the US market. This initiative, launched by President Donald Trump and Prime Minister Narendra Modi, aims to strengthen the supply chain and lay the foundation for a future comprehensive bilateral trade agreement.
Let us understand the nuances of this complex agreement in simple language through questions and answers.
Question: What is the biggest win for India in this deal?
answer: India has got better access to the US market for its key export sectors – pharmaceuticals (generic drugs), gems and jewellery, and aircraft parts – under this agreement. The US has committed to removing tariffs (import duties) on a wide range of these Indian products after the completion of the interim agreement.
Question: Has the Indian auto and aviation sector got any special exemption?
answer: Absolutely. In the aviation sector, the US will remove tariffs on aircraft and parts that were previously subject to national security measures related to imports of aluminium, steel and copper. Whereas, for the auto sector, India will get the benefit of ‘Preferential Tariff Rate Quota’. This simply means that Indian auto part manufacturers will get duty concessions compared to other non-priority suppliers in the US market, which will give them a competitive edge.
Question: What are the conditions for the Indian pharma sector?
answer: Generic drugs and pharmaceutical ingredients (APIs) have been included in this framework, which is a relief for Indian drug manufacturers. However, this will be subject to the findings of the US investigation under Section 232. Despite this, the agreement aims to keep market pathways open for Indian pharmaceutical companies, which play a major role in supplying affordable drugs to the US.
These agricultural products of America will not be allowed to be sold in India
These dairy products will also not get entry in India
Question: What rules have been decided regarding tariff?
answer: Under the framework, the US will initially impose a reciprocating tariff of 18 percent on Indian goods. But, importantly, once the interim agreement is finalised, the US has promised to remove these tariffs on many Indian products like generic drugs, diamonds and aircraft parts. Additionally, there is scope for further reduction in tariffs in a future comprehensive agreement.
Question: What was achieved on the front of technology and digital trade?
answer: This deal is not limited to just old industries. In this, emphasis has been laid on increasing the trade of graphics processing units (GPU) and goods used in data centers. Both the countries have talked about cooperation to make the supply chain secure and deal with the ‘non-market policy’ of third countries. Additionally, it has also been agreed to eliminate discriminatory practices in digital trade.
Question: What is the meaning of this agreement for both the countries?
answer: This interim framework is a first concrete step towards a full bilateral trade agreement between India and the US. While on one hand it will reduce compliance challenges for Indian exporters, on the other hand it will strengthen the economic security of both the countries. Now all eyes will be on how soon this framework is finalized and what will be the deadline for removing the tariffs.
