How will policy shifts impact India-US bilateral trade pact

Despite shared commitments to bolster trade, the prospect of a comprehensive bilateral trade pact akin to a free trade agreement (FTA) between the US and India appears dim, according to two people familiar with the matter.

Both countries were exploring possibilities of a bilateral trade deal, but seems to be steering clear from formalizing such an agreement in the foreseeable future, the people added, seeking anonymity.

"As of now, there are no immediate plans for a trade pact (along the lines of an FTA or a comprehensive economic partnership agreement) between India and the US. We don't expect a change in status quo in the coming months," one of the two people said. “However, with the impending US elections later this year, the incoming US government could take a different stand.” 

The second person echoed similar views. The outcome of the US elections will hold significant implications for Indian policymakers, as it could reshape bilateral trade dynamics, he said. 

Speculations are rife that if Donald Trump secures a second term in office, there is a possibility of the US exiting the World Trade Organization (WTO), and instead, renegotiating trade tariffs and duties directly with individual countries, he added.

India has a trade surplus with the US, and counts the North American nation as its largest export destination for over a decade. However, if the US exits the WTO it could expose Indian exports to higher tariffs, compelling both sides to engage in direct bilateral trade negotiations.

When contacted, a US embassy spokesperson said: “I cannot speculate on this November’s US elections. I can say that US-India trade in goods and services has expanded rapidly to nearly $200 billion in 2023, marking a tenfold increase from 2001, despite a challenging global trade environment.” 

"We see tremendous potential to increase and diversify bilateral trade and forge a more robust economic relationship with India," he added.

In 2023, Union commerce minister Piyush Goyal had ruled out the possibility of a mini-trade deal between the two nations. However, a commerce ministry spokesperson didn't respond to emailed queries on India's current stand on a US-India bilateral trade pact.

India's merchandise exports to the US stood at $13.24 billion in 2023, rising 12.84% from a year earlier, while merchandise imports from the US totalled $5.84 billion, down 28.53%, according to commerce ministry data.

While the US is pressing for greater market access in India, seeking lower tariffs for its agricultural and automotive products, besides raising trade deficit issues, India is seeking to expedited inspections and approvals from the US Food and Drug Administration (FDA) for its pharmaceutical products, and easier visa regulations, among other concessions.

Interestingly, in 2019, the US under President Donald Trump had revoked India's status as a beneficiary developing country under the Generalized System of Preferences (GSP), which had afforded preferential tariffs on exports to the US. India is seeking to restore its status.