India–US Trade Relations

India–US Trade Relations

Context

The Department-Related Parliamentary Standing Committee on Commerce presented its 200th Report on ‘Evaluation of India–US Trade Relations’. The report critically analyzes the current trajectory of bilateral commerce, highlighting structural headwinds such as elevated U.S. tariff measures and asymmetric service trade growth, while offering actionable recommendations to achieve the "Mission 500" target (USD 500 billion in total trade by 2030).

Key Challenges Identified by the Committee

1. Widening Service Import Asymmetry

• Explosive Trade Expansion: Total bilateral trade in services more than doubled over the past decade, rising from USD 40.53 billion in 2014 to USD 98.52 billion in 2024.
• CAGR Disparity: India’s services imports from the U.S. are growing at a significantly faster rate (18.68% CAGR) compared to its services exports to the U.S. (11.58% CAGR), threatening to narrow India's traditionally strong service trade surplus.

2. Tariff & Non-Tariff Barriers (NTBs)

• Elevated U.S. Tariffs: Average effective U.S. tariffs on key Indian exports have risen significantly—reaching 18% compared to historical rates of around 3%—driven by trade protectionism, Section 232/301 actions, and stringent non-tariff compliance hurdles.
• Impact on "Mission 500": These barriers impose severe drag on merchandise trade, risking the realization of the joint vision to scale bilateral trade to USD 500 billion by 2030.

Key Recommendations of the Committee

1.Institutionalize Trade Policy Forum (TPF) Monitoring:

Introduce a structured, time-bound review and monitoring mechanism within the bilateral Trade Policy Forum to resolve long-standing trade friction points and non-tariff barriers efficiently.

2.Expedite the India–US Bilateral Trade Agreement (BTA):

Fast-track negotiations for a comprehensive or mini-BTA to simplify cross-border regulations, establish regulatory stability, and enhance investor confidence across both economies.

3.Boost National Manufacturing Competitiveness:

Prioritize flagship industrial frameworks—such as Make in India, Production Linked Incentive (PLI) schemes, the National Logistics Policy, and PM Gati Shakti—to integrate Indian firms into global high-tech value chains.

4.Launch an MSME Export Resilience Framework:

Set up targeted support mechanisms including an Export Invoice Discounting Facility to guarantee liquidity, alongside an MSME Export Resilience Scheme offering subsidized financing and affordable credit to help small units meet strict U.S. compliance standards.

5.Establish a National Supplier Development Fund:

Provide fiscal incentives and matching grants for Indian manufacturers to undertake product redesign, re-tooling, testing, and international certification required for global integration.

6.Strengthen Critical Minerals & Emerging Tech Supply Chains:

Leverage multilateral and bilateral platforms—including the National Critical Minerals Mission (NCMM), IPEF, QUAD, and the U.S.–India Initiative on Critical and Emerging Technology (iCET)—to secure resilient supply chains in semiconductors, clean energy, and defense equipment through proactive "friend-shoring."

Summary Table: Key Committee Focus Areas

Conclusion

The Standing Committee's 200th report emphasizes that transforming India–US trade relations requires moving beyond transactional dispute settlement to strategic economic integration. By pairing institutional mechanisms like a fast-tracked Bilateral Trade Agreement with robust domestic MSME support and friend-shoring in emerging technologies, India can mitigate U.S. tariff barriers and sustainably progress toward the USD 500 billion trade milestone.