Ending months of uncertainty, India and the United States on Saturday announced the finalisation of the first tranche of a bilateral trade agreement, under which Washington will lower “reciprocal tariffs” on Indian exports to 18% over the next few days, while New Delhi will cut duties on a range of American imports. The joint statement also confirmed that US President Donald Trump has scrapped the 25% penalty imposed on Indian exports over New Delhi’s purchases of Russian oil. The move is expected to immediately restore the competitiveness of made-in-India products in the US market, including consignments currently in transit on the high seas.

Labour-intensive sectors with a strong MSME presence — including textiles, leather and footwear, and marine products — are expected to be the biggest beneficiaries. These sectors had been facing severe pressure due to an additional 50% tariff, which will now be brought down to 18% over and above the applicable product-specific or most-favoured-nation (MFN) tariffs. Briefing reporters, Commerce and Industry Minister Piyush Goyal said India had opted for a “calibrated opening up” of its market, allowing increased American access in areas where domestic requirements existed, while safeguarding sensitivities in key segments such as agriculture and dairy. He said products including cereals, corn, sugar, soybean, genetically modified (GM) food items and fuel ethanol had been kept outside the tariff-cut framework.

Agricultural goods remained the most contentious issue during negotiations. However, India has agreed to work out quota-based arrangements under which select products — such as apples and long-staple cotton fibre — will be allowed into the Indian market at lower duties, but in limited quantities. Import duties will also be reduced on pistachios, walnuts, almonds, soybean oil and certain lentils, as well as wines and whiskey. In addition, dried distillers’ grains and red sorghum used for animal feed will see duty concessions. In return, several Indian food products — including bananas, guava, spices, tea, coffee and a range of processed food items — will receive zero-duty access to the US market, providing a boost to India’s agri-exports and value-added food sector.