India and the United States are close to finalising a trade agreement that could significantly lower tariffs on Indian exports. Sources suggest tariffs might fall to around 15-16%, a substantial drop from the current 50%. This potential deal hinges on key areas like energy and agriculture.
One major point of discussion is India’s imports of Russian oil. To secure the trade deal, India may agree to gradually reduce its purchases of Russian crude. Currently, Russia supplies about 34% of India’s oil needs. This reduced reliance on Russian oil could help lift the punitive 25% levy imposed on Indian exports, which is in addition to other reciprocal tariffs.
In return for concessions, India is also likely to allow more non-genetically modified (GM) American corn and soymeal into its market. The US is keen to find new buyers for its corn, as China has drastically cut its imports. India is considering increasing the import quota for American corn, even though the import duty will remain at 15%. This could support India’s growing poultry feed, dairy, and ethanol industries.
Talks are also progressing on allowing non-GM soymeal imports for both human and animal consumption. However, there is still no clear agreement on reducing tariffs for US dairy products, including cheese, which is a significant demand from the US side.
The trade deal, known as a Bilateral Trade Agreement (BTA), could be announced during the ASEAN Summit, although participation from US President Donald Trump and Indian Prime Minister Narendra Modi is not yet officially confirmed.
Both countries have missed previous deadlines for such an agreement. However, the Indian side is now aiming for a conclusion by November 2025. The deal is being negotiated by India’s commerce ministry, external affairs ministry, and the national security adviser’s office.
On the energy front, India is considering allowing ethanol imports and reducing Russian oil purchases. The US is expected to offer trade concessions in return. Instead of a formal announcement, state-run oil companies might be informally advised to diversify their crude sourcing towards the US.
Top Indian officials have reportedly informed their Russian counterparts about the plan to reduce crude imports. While Russia has offered discounts on its crude, the price gap between Russian and other global crudes has narrowed. This has made oil from the Middle East and the US more competitive.
India currently imports about $12-13 billion worth of crude oil and gas from the US annually. There is scope to increase these purchases significantly without major changes to refinery setups. Overall, India’s crude oil imports were valued at $137 billion in the last financial year.
Bilateral trade between India and the US has shown growth, with exports to the US increasing by 13.4% in the first half of the current financial year.
Trade experts believe the US is motivated to finalise a deal with India, partly due to China’s stricter trade policies. They suggest the US might offer tariff access to India in the range of 16-18%.
However, some domestic industries are concerned. The Soybean Processors Association of India has warned that allowing US soymeal imports could harm local farmers and processors already facing difficulties.
Similarly, while allowing American corn could help the trade deal, it might lower domestic corn prices in India. On the other hand, it could create export opportunities for India’s ethanol sector.
Experts advise India to protect its interests in agriculture, digital trade, and intellectual property, and avoid any clauses that could limit its strategic independence.
The agreement is expected to include a mechanism for reviewing tariff levels and market access periodically, allowing for adjustments as market conditions change.