The US-India joint statement on the trade deal announced that the two countries have reached “a framework of an interim agreement”. Does the use of the terms “framework” and “interim” indicate that there are still many details to be worked out before the deal is actually signed?

The interim agreement provides an indication of the broad contours of the trade deal. However, on several key issues, the agreement is rather ambiguous, especially on the commitments India has taken on. In the next iteration, these ambiguities would have to be clarified. Besides, the interim agreement would undergo “legal scrubbing” before representatives of the two governments put their signatures. I would also like to mention that the interim agreement only includes issues pertaining to tariffs and non-tariff barriers and is the first step towards an eventual bilateral trade agreement that is currently being negotiated between the two countries. The BTA would cover all areas that are normally included in a free trade agreement: the more prominent of these are trade in services, intellectual property rights, competition policy, investment, and government procurement.

From the statement it also appears that the US will moderate some of the tariff measures introduced by the Trump administration but not eliminate them. India, on the other hand, will make tariff concessions relative to its position before President Donald Trump’s tariff measures, since India had not imposed any retaliatory tariffs. Would it be correct to say that the deal is skewed, with India appearing to concede greater market access than it gains?

The interim agreement shows that India has accepted gross asymmetry due to significant differences in the levels of tariffs that the two countries would be imposing on their respective imports. India would give US products duty-free access to its market, while the US would be imposing an 18 per cent tariff on its imports from India. Before Trump announced his tariff war in April 2025, the US’ average tariff on imports from India was about 2.5 per cent. This implies that through the interim agreement India has agreed to allow the US to impose a sevenfold increase in tariff protection..

This grossly unfair deal is particularly perplexing as it is a reversal of India’s consistently held position in trade negotiations that it would not accept a higher level of market opening than the one conceded by its developed country trade partners. In furtherance of this position, India has been strongly arguing in the WTO that vis-a-vis developed countries, developing countries must enjoy “less than full reciprocity” in tariff cuts and also special and differential treatment that allows them to take on less onerous commitments.

A group of farmers sporting black arm bands set fire to copies of the interim trade deal with the US, in Mysuru on February 15. | Photo Credit: M.A. Sriram

What in your opinion would have motivated the Indian government to accept this uneven arrangement? Is it that the deal is not expected to impact adversely India’s trade surplus with the US and its overall balance of payments situation?

Implementation of India’s trade deal with the US would completely alter the existing pattern of bilateral trade for two reasons. One, the commitment to import US products on zero tariff would surely allow American businesses to increase their footprint in India.

Two, the interim agreement states that India has expressed its “intent” to “buy more American products and purchase over $500 billion of US energy, information and communication technology, coal, and other products”, presumably over five years. This provision should be seen as tantamount to a “mandatory import clause” that turns the logic of a bilateral trade deal on its head.

These trade deals ensure market opening, allowing partner countries to leverage their respective economic strengths to increase bilateral trade. The American President seems aware that the US manufacturing industry lacks competitiveness, which puts a question mark on its ability to increase its exports despite India offering duty-free access to its market. The “mandatory import clause”, therefore, assumes significance.

It must be pointed out that this is a unique Trumpian way to forge trade deals. In his trade deal with China during his first term [in 2020], Trump had also included a “mandatory import clause”, requiring China to “import manufactured goods, agricultural goods, energy products, and services” amounting to not less than $200 billion for two years. India could face a more onerous burden, of imports amounting to $500 billion over five years.

For India, the implications of this “mandatory import clause” could be far-reaching. In 2025, India could have a merchandise trade surplus of almost $45 billion with the US, which could turn into a deficit of roughly the same amount if it imports an additional $100 billion from the world’s largest economy. The adverse impact on merchandise trade deficit and, hence, its current account deficit could be sizeable..

Are the provisions in relation to India’s purchase of Russian oil a minor issue or can they have a significant impact, given India’s dependence on oil imports?

Immediately after the announcement of the interim agreement, President Trump issued an Executive Order that stated: “India has committed to stop directly or indirectly importing Russian Federation oil, has represented that it will purchase United States energy products from the United States.” This was the basis for Donald Trump to remove the additional tariffs of 25 per cent that he had imposed on India in late August for importing Russian oil. More importantly, the American President has announced that his administration will maintain surveillance on India’s oil imports to ascertain whether India resumes oil imports from Russia in violation of its commitment to stop buying Russian oil. The US will reimpose 25 per cent additional tariffs if India resumes its Russian oil imports.

Worryingly, India has not objected to President Trump’s decision to maintain surveillance over India’s oil imports. This raises a significantly larger question: has India opened the door for US surveillance to extend to more sensitive areas that could challenge India’s sovereignty?

A demonstration in New Delhi on February 12, during a nationwide strike by trade unions to protest against the interim trade deal with the US. | Photo Credit: MANISH SWARUP/AP

A significant clause in the joint statement says: “India will eliminate or reduce tariffs on all US industrial goods and a wide range of US 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.” What is the likely impact on India’s manufacturing sector and on Indian farmers? These are important areas.

The joint statement does not explicitly state that India has been able to keep its sensitive agricultural products, especially cereals, from tariff cuts. In all its free trade agreements [FTAs], including the recently concluded EU-India FTA, there is an unambiguous statement saying that tariffs on these products will remain unchanged. Such a statement is missing from the joint statement on the trade deal with the US.

Doubts over whether India has reduced its tariffs on cereals were fuelled by President Trump when he first announced the deal on his social media platform, Truth Social. He emphasised that India would reduce its “Tariffs and Non Tariff Barriers against the United States, to ZERO”. Moreover, the US Secretary of Agriculture, Brooke Rollins, tweeted immediately after Trump’s social media post that the US-India deal would help “export more American farm products to India’s massive market, lifting prices, and pumping cash into rural America”.

Allowing imports of cereals would seriously jeopardise the livelihoods of India’s small farmers and the country’s hard-earned self-sufficiency in foodgrains. Back in the 1960s, India’s political leadership decided to ensure that the country produce its own foodgrains when the US threatened to stop wheat shipments under PL 480 [Public Law 480] as India had refused to accept its political demands. Food security must be regarded as national security, and therefore, India must not allow imports of foodgrains under any circumstances.

As for processed agricultural products, a Press Information Bureau release on February 9 said “limited and structured access [to the US] ensures that imports supplement, rather than replace, domestic production, contributing to price stability and greater product variety for consumers”. Thus, according to the government, tariffs on imports of processed food are being partially reduced in order to increase domestic availability of these products and to keep their prices in check.

Two issues need to be mentioned here that may undermine India’s growing food processing industry. First, in its FTA with the EU, India has eliminated tariffs on a wide range of processed food products, including juices, breads, pastries, biscuits, pasta, and chocolate, and it is unlikely that the US would agree to India’s imposition of tariffs on these products. Second, the government has been trying to develop India’s processed food industry as a global export hub, and adequate care should have been taken to ensure that this sector is able to withstand import competition, and that too from the dominant firms in the global market.

Some of India’s major domestic industries are likely to face import competition from the US following the proposed reduction in tariffs. These include passenger cars and select electronic products, including mobile phones. Passenger car tariff could witness a sharp decline, as has been seen in the case of FTAs with the European Free Trade Association, the UK, and the EU.

Opposition MPs protesting against the trade deal, outside Parliament on February 12. | Photo Credit: ANI

There are concerns that the animal feed market will be dominated by US companies. Is this a valid fear?

Though India has agreed to open its animal feed market by allowing imports of DDGs and red sorghum, this decision is unlikely to affect its domestic market as the landed price of DDGs is currently significantly high. However, if India imports animal feed as part of the American products worth $100 billion that it “intends” to import annually, US companies would be able to get a toehold in India. But it is unlikely that India’s animal feed market will be dominated by American companies.

India’s recent FTA with EU and before that the deal with the UK took place against the background of the Trump tariff measures. Do you think this had any impact on the India-US deal? What would be the combined effect of all these deals?

There is no doubt that Donald Trump’s invisible hand played a part in the formalisation of the two most recent FTAs, with the UK and EU. With the Trump tariffs causing significant policy uncertainties in the global economy, India and its new FTA partners could have bargained for two sets of benefits from their bilateral agreements. First, [that] these FTAs could provide predictable regimes for their companies to conduct their businesses. And second, [that] these agreements could provide opportunities to India and its FTA partners to increase their bilateral trade and thereby reduce their dependence on the US..

A few years ago India opted out of the Regional Comprehensive Economic Partnership (RCEP), which is an FTA between the Association of Southeast Asian Nations (ASEAN) and its FTA partners. It is now concluding trade deals with Western partners. Why this difference in approach, and what does this mean for the positioning within the global economy that India is seeking?

China’s presence in the RCEP was a major reason for India’s withdrawal from this mega-regional trade agreement. A combination of rising imports from its northern neighbour and its inability to export acted as disincentives for India. Moreover, the government could not accept the fact that its FTAs with the 10-member ASEAN grouping, the Republic of Korea, and Japan were registering increasing trade deficits, and it sought review of all these agreements. The economic uncertainties caused by the COVID pandemic changed the government’s scepticism regarding bilateral trade deals. Towards the end of 2021, the government announced that it would negotiate eight FTAs, including those with several developed countries, signalling its intention to deepen its global economic integration as one of the largest economies and to realise its ambition to join the ranks of developed countries by 2047.

Do such bilateral agreements indicate that multilateral arrangements like the WTO have become redundant?

Though bilateral trade agreements have coexisted with the multilateral trading system from almost the inception of the latter, over the past decade and a half developed countries led by the US have consistently opposed the multilaterally agreed rules of the WTO to erode the effectiveness of the organisation. As a result, the WTO has lost its legitimacy to a significant extent.

The bilateral trade agreements are now trying to provide a set of rules that would provide a degree of certainty to the businesses in the partner countries to enhance bilateral trade. But since each of these agreements brings a distinct set of rules, the global trading system is ending up with a mishmash of trade rules, which the trade economist Jagdish Bhagwati once labelled as a “spaghetti bowl”.