On February 6, India and the US released a joint statement outlining the framework for an interim trade agreement under the proposed Bilateral Trade Agreement. The interim framework reflects a familiar US negotiating approach — securing market access, regulatory concessions, and strategic alignment without offering commensurate commitments in return. The agreement risks locking India into obligations that are difficult to reverse.
Both sides have agreed to strengthen “economic security alignment” to address non-market policies of third countries. In effect, this seeks to align India’s economic and security policies with those of the US, and therefore warrants serious caution. Agreeing to such language could have far-reaching consequences. If the US were to impose steep tariffs on imports from countries like Russia or China on economic security grounds, India could be expected to adopt similar measures. India may also be required to restrict trade or financial transactions with third countries sanctioned by the US, severely limiting its ability to pursue an independent foreign policy.
This alignment could extend further. India may be compelled to buy items like nuclear reactors from the US and not from other suppliers. India may also be expected to consult the US before entering into digital trade agreements with other countries, to ensure that such agreements do not affect US interests. It could also constrain India’s ability to negotiate technical, health, or regulatory standards with third countries if those are perceived as disadvantageous to US firms.
Similar commitments have already been extracted by the US from Malaysia. Given India’s size, global role, and sovereign interests, tying its economic and security policies too closely to any single country carries significant risks. India should therefore seek to clearly limit or opt out of this aspect in the next phase of negotiations.
The joint statement records India’s intention to purchase $500 billion worth of US goods over the next five years. Meeting this target would require India’s annual imports to rise from around $45 billion to nearly $100 billion. Aircraft purchases are highlighted as a major component of this commitment. India currently operates about 200 Boeing aircraft. Even if another 200 Boeing aircraft were added over five years, the total value would be roughly $60 billion. Moreover, aircraft purchases are commercial decisions taken by private airlines, not by the government. Overall, the pledge of buying $500 billion goods appears implausible.
India is already highly dependent on US software and technology firms, making it, in effect, a digital colony. Against this backdrop, the digital trade language in the joint statement is worrying, as it signals a readiness to give up long-held policy positions.
The US would require India to remove barriers to digital trade and adopt binding rules that could force it to drop its opposition at the WTO to a permanent moratorium on customs duties on electronic transmissions. Such commitments would also limit India’s future ability to tax and regulate global technology firms.
Accepting such terms would weaken India’s position at the WTO and sharply reduce its digital policy space. It would limit India’s ability to levy equalisation taxes, regulate large digital platforms, or shape its digital economy. For a country already dependent on foreign tech firms, giving up regulatory and fiscal autonomy in the sector would be a costly and hard-to-reverse mistake.
India agreed to reduce or eliminate MFN tariffs (most favoured nation) on all US industrial goods and on a wide range of food and agricultural products. These include animal feed such as DDGs and red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, and additional agricultural products. It is unclear which or how many “additional agricultural products” are covered.
In automobiles, while India has offered only limited tariff concessions under its FTAs with the UK and the EU, it remains unclear whether concessions to the US will be capped through quotas and partial duty cuts, or allow unlimited imports with full tariff elimination. Tariff elimination on electronic components, smartphones, and solar panels could also undermine domestic manufacturing in these sectors. The US will not reduce its normal MFN tariffs on any products. Instead, it is only cutting the “reciprocal tariffs”, lowering them from 50 per cent to 18 per cent. This reduction is modest compared to recent US trade deals.
The main beneficiaries of the tariff cut will be Indian exports of textiles and apparel, leather and footwear, plastics and rubber, organic chemicals, home décor and artisanal goods, and some machinery. They have reasons to celebrate.
India has agreed to ease several so-called non-tariff barriers. These include relaxing rules on import of medical devices, removing import licensing for US ICT products, and deciding within six months whether to accept US or international standards and testing procedures in certain sectors. India has also committed to addressing regulatory issues affecting US food and agricultural exports. Malaysia accepted US sanitary and health certificates for dairy, meat, and poultry imports, effectively prioritising US standards over its own domestic regulations. Crucially, the US did not offer similar regulatory access or recognition for Malaysian exports. India could face a similar outcome.
The US often labels Indian regulations as non-tariff barriers. India, however, sees them as essential regulatory tools. These measures apply to sensitive sectors such as agriculture, dairy, digital trade, and product standards — areas where India relies more on regulation than tariffs.
The dairy sector illustrates this tension clearly. US exporters have objected to India’s certification requirement that bans products from cows fed the meat of another cow. Treating such regulations as mere trade barriers ignores domestic realities. The broader concern is that the US is seeking to dilute India’s regulatory framework without simplifying or opening up its own. India must therefore proceed with caution.
The joint statement confirms President Donald Trump’s February 2 claims, except that it contains no confirmation from the Indian side on stopping imports of Russian oil. The US has issued an order saying it will monitor India’s import of oil from Russia and if India falters, the US may consider imposing high tariffs again. Thus the US tariff reductions are conditional on geopolitical expectations that India has neither publicly accepted nor formally committed to, underscoring the need for clarity.
As negotiations proceed, India must resist pressure to trade long-term regulatory autonomy and strategic flexibility for short-term tariff relief. The next phase should focus on restoring balance, clarity, and reciprocity.
The writer is founder, GTRI
