India-US trade deal to increase US' exports to India: Crisil

India Gazette

10 hours ago

New Delhi [India], June 23 (ANI): Given that India has much higher tariffs than those imposed by the US, the impending bilateral trade agreement (BTA) -- that would reduce tariffs-- is set to increase the US's exports to India more than vice versa, according to an analysis by Crisil.
India would be able to import more energy products, certain agricultural products, and defence equipment, among others, from the US, Crisil said in a 'Quickonomics' report.
India, according to Crisil, should be prepared to see more imports from the US under the bilateral trade agreement (BTA). A lowering of tariffs under the BTA would make US goods more competitive in India, it argued.
'This is because India's tariffs are much higher than those of the US, and bringing these down would be advantageous to exporters in the US,' Crisil said.
India's exports, however, are unlikely to see a major spike because the focus of the President Donald Trump administration is to reduce its trade deficit with India, and most of India's top exports to the US are already duty-free (before the application of baseline 10 per cent, which is applicable since April 10). Besides, the export potential would also depend eventually on the amount of tariff India faces when compared with other competing nations, Crisil noted.
The US has categorically said that it wants to reduce its trade deficit with India (among other nations) and has complained that India's high tariffs and non-tariff barriers have been a hindrance for American companies looking to increase their exports.
Even as India had shown its discomfort in allowing US agriculture products to be exported to India, imports of certain agriculture products such as walnuts, pistachios and cranberries could get a fillip as India's share in US exports of these items was relatively low -- at 19.4 per cent, 5.0 per cent and 3.1 per cent, respectively -- in 2024. This contrasts with almonds, where India's share was a hefty 70.5 per cent in 2024 -- one of the US's top agricultural export items to India.
Further, with India's aviation sector growing, there is scope to increase imports of civilian aircraft, engines, and parts.
According to Crisil, there also seems to be good complementarity in the energy space as the US is a large exporter and India is a large importer of energy commodities.
Even though India has a huge opportunity to import crude oil from the US, Crisil said the prospects of increasing crude oil imports from the US would have to be viewed against challenging factors -- such as higher cost of transportation, including the longer transit time.
'The US is a large exporter and India a large importer of LNG, providing a mutually beneficial ground. Here, the synergy seems to be much better than that in crude petroleum as the US is already among the top three suppliers of LNG to India,' Crisil said.
'With favourable factors such as US natural gas prices being more stable than those in the Middle East (India's largest LNG import partner) and long-term contracts being signed between Indian entities and US suppliers, there has been an increase in the import of this commodity from the US,' it added.
Defence imports into India could see a rise under the bilateral trade agreement.
'Even as India is trying to increase its defence production and export capabilities, it remains one of the largest arms importers. At the same time, the US is the world's largest arms exporter. While Russia has been India's largest arms supplier traditionally, its share in India's arms imports has come down in recent years. This has created space for western suppliers, led by the US, to step up their sales,' the report said.
In fact, in 2023, the US and India launched a bilateral Defence Acceleration Ecosystem (called INDUS-X) to facilitate defence collaboration between the countries.
Combining all these opportunities, India's trade surplus with the US is expected to come down -- a major ask of the US, as it has implemented reciprocal tariffs on countries in proportion to the trade surplus.
On the contrary, India may see some gains in exports of smartphones, certain pharmaceuticals and labour-intensive sectors such as textiles and gems and jewellery.
The US announced reciprocal tariffs on India and a host of other nations on April 2, and then paused the increase for 90 days from April 10 to negotiate trade deals with these countries (for India, the reciprocal tariff was 26 per cent, lower than the tariff on many other Asian peers).
During the pause period, a 10 per cent base tariff remains applicable (over and above the existing tariffs) on all countries, including India.
India is negotiating a trade deal with the US, called the bilateral trade agreement (BTA) -- the first tranche of which is targeted to be completed by the fall of 2025. (ANI)