Reports say that India and the United States are close to finishing a big trade deal between the two countries that has been stuck for a long time. This historic accord will change the way the two countries trade with each other in a big way, mostly by lowering tariffs and changing the way energy is traded, which will affect India’s relationship with Russia.
Important Parts of the Deal That Is Coming
A Mint report that cites sources close to the talks says that the deal, which focuses mostly on the energy and agriculture sectors, is almost done and could be announced at the upcoming ASEAN Summit during a meeting between US President Donald Trump and Indian Prime Minister Narendra Modi this month.
- Lower tariffs and fines
India’s main benefit will be because American tariffs will go down a lot:
The US is likely to cut its duties on some Indian goods to between 15% and 16%, which is a big drop from the present 50% penalty rate.
Reciprocal Tariffs: The 50% tax that is currently in place includes a 25% penalty tax on Indian exports. This tax was added to the 25% reciprocal tariffs that were declared before.
- The Role of Energy and Russia
India’s dependence on Russian crude oil is a major bone of contention in the talks.
Modi’s Promise: President Donald Trump said he talked to Prime Minister Modi on Tuesday and that most of the conversation was about trade and energy. Trump said that Modi told him that India would limit how much oil it buys from Russia.
India’s Current Reliance: Right now, Russia sends about 34% of India’s crude oil imports. In terms of value, the US meets around 10% of India’s total oil and gas needs.
Gradual Reduction: India may be “informally guided” to get more of its crude oil from the US as a condition for the trade agreement. It is also thinking about gradually reducing its dependency on Russian oil. In return, Washington is anticipated to make concessions on energy commerce, such as letting the US send ethanol to other countries.
The Indian External Affairs Ministry had said before that they didn’t know of a firm promise to quit buying Russian energy, which means that any cutback would happen slowly, depending on how well it worked for the economy.
- Access to the agricultural market
India is willing to open up its huge agricultural markets in exchange for lower tariffs:
India might raise the restriction on how much American corn and soymeal it can import that isn’t genetically modified (non-GM). Right now, the maximum is 0.5 million tonnes per year. It looks like the 15% tax on maize imports will stay the same. The goal of the move is to address the increased demand for chicken feed, dairy, and ethanol in the US.
Imports of soymeal: New Delhi is also moving forward with talks to allow imports of non-GM soymeal for people and animals to eat.
Dairy Uncertainty: The American negotiating team is still waiting for more information on tariff cuts for US dairy products, notably high-end cheese, which is a major demand.
- Being able to change in the future
New Delhi wants the final deal to include a clause that allows for regular reviews of tariffs and market access restrictions. This would make sure that the arrangement may change over time.