As senior US trade officials led by newly appointed Deputy USTR Rick Switzer and chief negotiator Brendan Lynch arrive in New Delhi for a crucial two-day dialogue beginning Wednesday, the future of the long-delayed US-India trade agreement hangs in the balance.
The stakes are high — for both economics and geopolitics — with New Delhi viewing this round as a defining moment that could determine policy direction for India’s global trade and investment strategy.
For months, the absence of a trade pact has resulted in steep US tariff barriers on Indian exports, delayed investments, and growing concerns that Washington’s approach risks undermining ties with a key partner seen as a critical counterweight to China.
Yet, optimism prevails in the Indian establishment. Commerce Secretary Rajesh Agrawal recently said sealing the deal is “only a matter of time.”
India now stands at an inflection point:
If the negotiations succeed, the country can consolidate US economic ties and revive stalled export momentum.
If talks fail, India may have to pivot more sharply toward other trade partners and deepen diversification beyond US markets.
Evolving Trade Dynamics: Surplus Shrinks, Strategy Shifts
India’s trade surplus with the US has halved — from $3.17 bn in April to $1.45 bn in October — reflecting increased Indian imports and shrinking exports post US tariff hikes.
India’s exports to the US dropped from $6.86 bn in August to $6.30 bn in October.
Imports surged from $3.6 bn to $4.84 bn in the same period
Labour-intensive sectors — textiles, footwear, sports goods — are among the hardest hit.
This shift is deliberate: New Delhi has boosted energy imports from the US to rebalance trade and build goodwill before the talks.
Oil & Energy: A Strategic Lever
The collapse in negotiations in August — when additional tariffs raised the duty impact to 50% — forced India to rethink. Since then: The
- US share in India’s crude imports jumped to 7.48% from 4.43%
- Russia’s share slid due to US sanctions on major Russian oil firms
India’s LPG import deal of 2.2 MTPA from US refiners marks another major alignment in energy security — potentially paving the way for tariff rollback.
Simultaneously, India is signaling readiness for nuclear energy cooperation, with PM Modi recently hinting at opening the sector to private participation — a long-standing US ask.
Investment Flows Under Stress
The prolonged uncertainty is impacting investor sentiment:
- FDI, FPI, and debt flows have slowed significantly
- RBI has sold $65 bn to support the rupee between Oct 24–Sept 25
- The rupee is down 7% YoY, leading to a real depreciation of over 9%
A timely resolution could restore confidence, ease currency pressure, and revive capital inflows.
Government Races to Reform and Diversify
To soften the tariff blow and retain competitiveness, New Delhi has:
Rolled back several Quality Control Orders
Removed 11% duty on cotton to support textiles
Rationalised GST rates on mass-consumption goods
Fast-tracked labour reforms under the Rajiv Gauba-led panel
Simultaneously, India is expanding trade horizons:
- Talks ongoing with the EU, New Zealand, Israel, Chile, Peru
- Negotiations were launched with the Eurasian Economic Union, led by Russia
What Happens Next?
This week’s talks could define India’s next move:
If the deal is finalised ➜ reboot bilateral trade, boost exports, secure tariff relief
If the impasse continues, ➜ stronger push for non-US partnerships and alternative markets
For India — which is balancing national economic resilience with strategic diplomacy — the outcome offers a roadmap for future trade priorities.
All eyes now on Wednesday’s meeting:
Will Washington reset ties with India — or push New Delhi deeper into global diversification?
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