India has officially committed to pursuing trade liberalization with the United States, with high-level talks set to begin this month and continue in person by May. Indian Trade Secretary Sunil Barthwal confirmed the U.S. India Trade Deal on Tuesday, marking a key step in negotiations that began during President Donald Trump’s 2020 meeting with Indian Prime Minister Narendra Modi.
Both nations are working toward completing the first phase of a trade deal by October. However, Indian officials, while enthusiastic, signaled reluctance toward a zero-tariff framework. Instead, they prefer a more flexible, package-style agreement focused on mutual concessions.
India argues that its significantly lower per capita income compared to the U.S. justifies keeping some tariffs in place to protect its consumers. Indian analysts have floated ideas such as selective zero-tariff exchanges—allowing American goods like high-end machinery and agricultural products into India while requesting U.S. tariff reductions on labor-intensive exports such as textiles and chemicals.
This approach reflects a broader economic strategy. India hopes to secure long-term growth through manufacturing, though challenges persist. Despite Prime Minister Modi’s “Make in India” initiative, the country’s manufacturing sector remains small relative to services and agriculture. Infrastructure and legal systems continue to hold back growth, with court inefficiencies discouraging small manufacturers from scaling operations.
One Indian industry leader noted that slow and unpredictable court rulings make business expansion risky. This legal uncertainty, he said, keeps firms small and inefficient—unable to compete with global players.
Despite these setbacks, India has posted some major manufacturing wins. Apple iPhone production in Tamil Nadu now accounts for nearly 20% of global output, with expectations to grow to 30%. These gains suggest potential if structural reforms continue.
India’s willingness to pursue a deal traces back to Trump-era overtures, including its offer to purchase more U.S. oil and military hardware. Trump once hinted India could become the first non-NATO ally to buy F-35 fighter jets, signaling a strategic alignment beyond just trade. While he openly criticized India’s tariff practices, calling the nation a “tariff abuser,” both governments have maintained momentum through pragmatic cooperation.
Still, the New York Times questioned whether India is prepared to capitalize on U.S.-China tensions. The paper noted India’s economy is just one-fifth the size of China’s, with major gaps in skilled labor and production capacity. Indian officials, however, maintain that negotiations are progressing well and present a rare opportunity for both sides.
As the Biden administration continues these Trump-initiated discussions, the final structure of any deal will likely reflect Modi’s preference for balanced terms—where American and Indian industries both gain without sacrificing domestic stability.
