Why in news?

A day before the US reciprocal tariffs take effect on April 2, India has agreed to the Terms of Reference (ToR) for a Bilateral Trade Agreement (BTA) with the US. The ToR sets the negotiation framework and required high-level approval.

While discussions were still ongoing when US negotiators left after four days of talks, both countries are now set for formal negotiations.

What’s in Today’s Article?

• US Criticizes India’s Trade Policy
• India-US Bilateral Trade Overview
• Proposed India-US Trade Agreement
• US Tariff Pressure and India's Response
• Conclusion: Balancing Trade and Geopolitics

US Criticizes India’s Trade Policy

• The United States Trade Representative (USTR) has raised concerns over India's trade policies in its ‘Foreign Trade Barriers’ report.
• Key Concerns Raised by USTR
  • Internet Shutdowns
    • The US claims localized shutdowns disrupt commercial activities.
  • Dairy Feed Regulations
    • India mandates that dairy products must come from animals that have not consumed blood meal or internal organs, a rule the US argues lacks scientific justification.
  • Agricultural and GM Food Imports
    • India requires GM-free certification for milk, pork, and fish imports, which the US says is not based on scientific risk assessment.
    • The report raised concerns over India’s agricultural support programmes, claiming they distort markets.
    • It also criticized India’s pulse import restrictions as being opaque and unpredictable.
  • India’s Data Localisation Rules
    • The USTR report raised concerns over India's data localisation requirements for payment service providers and banks.
    • Since 2018, the Reserve Bank of India (RBI) has mandated that all electronic payment data related to Indian citizens be stored on local servers.
    • The US argues that this regulation was introduced without stakeholder consultation and hampers foreign firms’ ability to detect fraud and secure global networks.
  • Intellectual Property (IP) Issues
    • India remains on the ‘Priority Watch List’ due to weak trade secret protection and slow patent approvals.
    • It flagged multiple issues in India’s intellectual property (IP) framework, including:
      • Patent Delays: Long waiting periods for patent grants and excessive reporting requirements.
      • Patentability Restrictions: The US continues to monitor India’s Section 3(d) of the Patents Act, which limits patentability to prevent evergreening of pharmaceutical patents.
      • Weak IP Enforcement: Concerns over inadequate protection of undisclosed test data, lack of an early resolution mechanism for pharmaceutical patent disputes, and delays in trademark opposition proceedings.
      • Trade Secret Protection: The absence of specific laws for safeguarding trade secrets.
  • Medical Price Controls
    • The US criticized India’s price caps on coronary stents and knee implants, arguing they discourage American manufacturers due to inflation and production cost concerns.

India-US Bilateral Trade Overview

• U.S. total goods trade with India were an estimated $129.2 billion in 2024.
• U.S. goods exports to India in 2024 were $41.8 billion, up 3.4 percent ($1.4 billion) from 2023.
• U.S. goods imports from India totalled $87.4 billion in 2024, up 4.5 percent ($3.7 billion) from 2023.
• The U.S. goods trade deficit with India was $45.7 billion in 2024, a 5.4 percent increase ($2.4 billion) over 2023.

Proposed India-US Trade Agreement

• Both nations plan sector-specific negotiations to finalize a bilateral trade agreement.
• Key objectives:
  • Increase market access for goods.
  • Reduce tariff and non-tariff barriers.
  • Strengthen supply chain integration.
• The US seeks duty reductions on industrial goods, automobiles, wines, petrochemicals, dairy, and agricultural products.
• India may push for concessions on labour-intensive sectors like textiles.

US Tariff Pressure and India's Response

• Former US President Donald Trump criticized India’s high tariffs, calling them "brutal," and proposed reciprocal tariffs.
• India’s Possible Trade Strategy
  • Lobbying for Exemptions: India may negotiate trade exemptions to avoid severe economic impacts.
  • ‘Make in India’ Expansion: India could attract companies seeking to exit China and relocate manufacturing.
  • Strengthening Trade with Other Regions: Deepening ties with the EU, Southeast Asia, and Africa to reduce dependence on the US.
  • Diversifying Trade Relations: Expanding into new markets to minimize risks from US trade policies.
• Potential Benefits for India
  • Shift in Supply Chains: US tariffs on China could push global manufacturers to expand operations in India.
  • Growth in Key Sectors: Electronics, automobiles, and pharmaceuticals may benefit.
  • Boost for Indian Automakers: If US tariffs make European and Chinese cars expensive, Indian brands like Tata, Mahindra, and Maruti Suzuki could gain traction.

Conclusion: Balancing Trade and Geopolitics

India’s reaction will depend on the severity of US tariffs and their economic impact. The India-US strategic partnership extends beyond trade, making a balanced approach crucial for both nations.