New Delhi [India]: A potential India-US trade agreement is expected to include sensitive sectors such as agriculture, automobiles, and pharmaceuticals, according to a recent Jefferies report.
These sectors hold political and economic significance for India, primarily due to the country’s high tariff rates on key imports.
Key Highlights of the Report:
🔹 Tariffs & Trade Sensitivity
- India maintains high import duties on automobiles, electronics, and agricultural commodities to protect domestic industries from foreign competition, particularly from China.
- In negotiations with the US, India may need to reconsider its tariff policies to facilitate a deal.
🔹 Agriculture & Political Implications
- The US is likely to push for reduced import duties on corn, soybeans, wheat, and dairy products.
- This could have political implications in India, especially among local farmers who rely on protectionist policies.
- However, Indian consumer companies could benefit from lower-cost imports.
🔹 Pharmaceuticals & Intellectual Property Rights (IPR)
- The US may demand stricter patent regulations, which could impact India’s generic drug industry.
- India will have to ensure that any pharmaceutical-related concessions align with ongoing trade discussions with the EU and UK.
🔹 Balancing the Trade Deficit
- To balance its $46 billion trade surplus with the US (2024 data), India may need to increase imports of defence equipment, oil, and gas from the US.
🔹 India’s Tariff Structure Compared to Other Nations
- India’s trade-weighted average tariff rate: 12.0%
- China, Mexico, Indonesia: 3-5%
- US: 2.2%
(Source: WTO, 2023)
🔹 Impact on Key Indian Industries
- Sectors such as automobiles, pharmaceuticals, textiles, and alcohol could face challenges if tariffs are lowered.
- Indian exporters, however, may benefit from improved access to the US market.
Conclusion
As India actively negotiates trade deals with the US, UK, and EU, the final terms of these agreements will shape the country’s economic policies for years to come. The government must strike a balance between trade liberalization and protecting domestic industries.