India-US Trade Deal: Trade deal between India and America has been announced. Under this agreement, America has reduced the tariff on Indian goods from 50 percent to 18 percent. This could not have been a better time for Indian exporters. This is a news of great relief especially for the companies making garments, leather and footwear. These companies had just shipped their containers for the summer season and were worried about the next season. For the last few months, many small Indian companies had stopped exporting to America, while big companies were somehow saving their business by giving huge discounts.
Additional tariff will also be removed
Announcing this deal, US President Donald Trump said that the tariff on India has been reduced to 18 percent. Besides, the additional tariff of 25 percent imposed by India on purchasing Russian oil is also being removed. Trump said that Prime Minister Narendra Modi has agreed to stop purchasing Russian oil. According to a report in Times of India, officials say that India’s concerns have also been taken into account in this deal and America’s concerns have also been fully included.
Will India outweigh China and Bangladesh?
America is India’s largest trading partner and mutual trade between the two countries is worth 131.84 billion dollars. The most important thing is that India is in a trade surplus situation with America. Both the countries were negotiating a trade agreement since February last year and have set a target of taking mutual trade to $500 billion by 2030.
Indian goods more competitive in American market
After the trade deal, Indian goods have now become more competitive in the American market. For example, Indian garments will now attract 18 per cent tariff, whereas those from Bangladesh and Sri Lanka will attract 20 per cent tariff. Similarly, Indian carpet will also benefit. Indian carpet had to lose a lot of market share due to 50 percent tariff, but now it will be cheaper than Turkish carpet. Similarly, once again Indian shrimp will also become cheaper in the American market. Companies exporting gems and jewelery have also heaved a sigh of relief after this decision.
Competition with China and which sectors will be affected?
Now Indian goods will become cheaper in America as compared to China, because 34 percent tariff is imposed on most of the Chinese goods in America. However, tariffs on auto parts and metal will remain intact for now. The companies are still waiting for the complete details of this trade deal, because no joint statement has been issued on it. Meanwhile, India has also recently signed trade deals with the UK and the European Union, which will provide an opportunity to Indian exporters to further diversify their business.
Export figures and impact of previous tariffs
Between April and November, America’s exports from India increased by 11.3 percent to $59 billion. During this period, smartphone exports doubled to $16.7 billion. In August, 25 percent tariff was imposed on Indian goods and after that an additional 25 percent tariff was also imposed on buying oil from Russia. Many companies had already sent more goods to America to avoid this tariff. Apart from this, tariff was not applicable on about 40 percent of exports from India to America, which include electronics and pharma sectors.
