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In a significant development, India and the United States have unveiled a framework for a provisional trade agreement aimed at reducing tariffs on Indian products. However, this move has sparked criticism from Indian opposition parties, who argue that the deal disproportionately benefits Washington.
The joint announcement was made on Friday, following U.S. President Donald Trump’s recent declaration of his intent to lower import tariffs on India. This comes six months after he had imposed high tariffs, urging New Delhi to decrease its dependence on inexpensive Russian oil.
According to the agreement, tariffs on Indian goods will be reduced from 25% to 18%. This adjustment follows Indian Prime Minister Narendra Modi’s commitment to cease purchasing Russian crude oil, as per Trump’s statements.
Both nations have described the agreement as “reciprocal and mutually beneficial,” emphasizing their dedication to pursuing a more comprehensive trade deal. This future deal aims to offer further market access and strengthen supply chain resilience. However, the framework indicates that further negotiations are necessary to finalize the agreement.
Additionally, India has pledged to “eliminate or reduce tariffs” on all U.S. industrial goods as well as a diverse array of food and agricultural products, according to the statement released on Friday.
The US president had said that India would start to reduce its import taxes on US goods to zero and buy $500 billion worth of American products over five years, part of the Trump administration’s bid to seek greater market access and zero tariffs on almost all American exports.
Trump also signed an executive order on Friday to revoke a separate 25% tariff on Indian goods he imposed last year.
Indian Prime Minister Narendra Modi thanked Trump “for his personal commitment to robust ties.”
“This framework reflects the growing depth, trust and dynamism of our partnership,” Modi said on social media, adding it will “further deepen investment and technology partnerships between us.”
India’s opposition political parties have largely criticized the deal, saying it heavily favors the US and negatively impacts sensitive sectors such as agriculture.
In the past, New Delhi had opposed tariffs on sectors such as agriculture and dairy, which employ the bulk of the country’s population.
Meanwhile, Piyush Goyal, Indian Trade Minister, said the deal protects “sensitive agricultural and dairy products” including maize, wheat, rice, ethanol, tobacco, and some vegetables.
“This (agreement) will open a $30 trillion market for Indian exporters,” Goyal said in a social media post, referring to the US annual GDP. He said the increase in exports was likely to create hundreds of thousands of new job opportunities.
Goyal also said tariffs will go down to zero on a wide range of Indian goods exported to the US, including generic pharmaceuticals, gems and diamonds, and aircraft parts, further enhancing the country’s export competitiveness.
India and the European Union recently reached a free trade agreement that could affect as many as 2 billion people after nearly two decades of negotiations.
That deal would enable free trade on almost all goods between the EU’s 27 members and India, covering everything from textiles to medicines, and bringing down high import taxes for European wine and cars.
India also signed a comprehensive economic partnership agreement with Oman in December and concluded talks for a free trade deal with New Zealand.