Free trade agreement with the US? What India needs to do to secure a deal

Indian Express

03-06-2025

Written by Abhik Sengupta
India finds itself at a pivotal moment in its trade relationship with the United States. With negotiating teams shuttling between New Delhi and Washington, and trade minister Piyush Goyal making frequent trips to meet his American counterparts, there's unprecedented momentum in bilateral trade talks. As negotiations intensify, India must balance ambition with pragmatism to secure a deal that truly serves its interests.
Industry sources and trade experts suggest both promise and perils ahead for India.
Reports indicate that India has made substantial tariff offers and is negotiating what essentially amounts to a comprehensive free trade agreement with the US. The question now is whether India can secure enough in return to make this ambitious gamble worthwhile.
The current negotiations cover an extraordinary 19 chapters — from goods and services to intellectual property and environmental standards. This isn't the limited 'mini-deal' that fell through during Donald Trump's first presidency. India is going all-in, offering substantial market access concessions to avoid punitive tariffs that could devastate its export competitiveness.
The arithmetic is stark: The US is India's largest export market, and Indian exporters have thrived under relatively low American tariffs. Now they face the prospect of a 10 per cent universal tariff plus additional sector-specific duties unless India can negotiate exemptions. For a country that exports roughly $8 billion in pharmaceuticals alone to America — medicines that benefit American consumers — the stakes couldn't be higher.
India's negotiating strategy should focus on three non-negotiables. First, genuine tariff relief. If the US expects India to make unprecedented concessions, it must offer more than just reducing tariffs from 25 per cent to 10 per cent. India needs clear exemptions from the universal tariff and meaningful access improvements, particularly in pharmaceuticals where Indian generics serve American consumers without threatening US pharmaceutical leadership.
Second, protection from future tariff escalation. Available information suggests that the US is conducting multiple investigations under Section 232 that could lead to new tariffs on various sectors. India must secure guarantees that any deal includes protection from such future measures — not just current ones.
Third, services sector gains. India's competitive advantage in IT services, business process outsourcing, and professional services must be recognised and expanded. Any comprehensive agreement that doesn't significantly enhance India's services exports would be incomplete.
India's negotiators must also grapple with the China question. Trade analysts note that American trade officials are increasingly asking Asian partners to reduce Chinese products (and equipment) in their supply chains and accept anti-circumvention provisions. For India, this presents both opportunity and risk.
While India can position itself as an alternative to China in global supply chains, it must be careful not to accept overly restrictive rules that could limit its own trade relationships. Unlike Southeast Asian countries that are heavily dependent on Chinese trade and investment, India has more room to maneuver — but it shouldn't overplay this hand.
The recent UK-US deal offers important lessons. While announced with fanfare, it's essentially a framework agreement that postpones detailed negotiations. The UK secured some specific wins — automotive tariff quotas and pharmaceutical provisions — but much remains to be negotiated.
India should resist pressure for a similar framework-heavy announcement without substance. Trade experts have noted concerns that such deals can represent a waste of negotiating leverage when countries have put substantial offers on the table. India has put substantial offers on the table and should extract maximum value in return.
India must also be realistic about American capacity. Observers note that US trade officials are simultaneously negotiating with dozens of countries under compressed timelines. This creates both opportunity — America needs quick wins — and risk (that deals will lack substance).
The complexity of non-tariff barriers, from technical standards to regulatory alignment, cannot be rushed. India should prioritise the most fixable issues in the short term while establishing frameworks for longer-term resolution of complex regulatory matters.
India's strategy should be calibrated pragmatism. In the immediate term, it has to secure concrete wins on tariff exemptions and market access while establishing robust frameworks for comprehensive negotiations. Don't settle for vague commitments. In the medium term, India should use the negotiations to address longstanding trade irritants and create new opportunities in emerging sectors like digital services and green technology. Finally, in the long term, India should position itself as America's preferred partner in reshaping global supply chains, but on terms that preserve the former's strategic autonomy.
India has positioned itself well in these negotiations through early engagement and substantial offers. Prime Minister Narendra Modi's February visit to Washington and the sustained diplomatic push have created genuine momentum. But momentum must translate into concrete gains. India cannot afford to accept a deal that merely avoids the worst-case scenario of high tariffs without securing meaningful benefits.
The coming weeks will determine whether India emerges from these talks as a strategic winner in the new global trade architecture or merely as another country that avoided punishment. The difference will define India's economic trajectory for years to come. The stakes demand nothing less than India's best negotiating performance. The country that has transformed itself into a global economic power must now prove it can secure deals worthy of that status.
The writer works as a Program Associate for North America at the Confederation of Indian Industry (CII), based in Washington, DC