India is set to finalize an interim trade pact with the United States, which may be signed as early as this week, reported Financial Times, citing sources close to the negotiations. If finalized, the pact would be one of the first such agreements between Washington and a major trading partner under the current U.S. administration.
The negotiations have gone into the final phase, with Indian officials staying on in Washington beyond the originally scheduled two-day trip which ended on June 27.
The two nations are racing against time to complete the agreement by July 9 — the date by which the U.S. is scheduled to reinstate a 26% retaliatory duty on Indian exports. The duties were originally introduced by former President Donald Trump in April but were put on hold for 90 days.
Though various contentious issues have made some progress, key differences still exist. Indian negotiators are steadfast in safeguarding certain domestic industries, particularly agriculture, genetically modified crops, and dairy — sectors considered to be essential to the survival of hundreds of millions of small and marginal farmers.
"There are red lines that will not be crossed," a source close to the negotiations said in an interview with Financial Times. "India's position in those areas is very clear."
The U.S. has been pushing for greater access to Indian markets for GM products, animal feed, and a variety of agriculture and dairy products — sectors where India has traditionally had protective walls.
Washington also wants lower tariffs on a raft of industrial products, such as electric vehicles, petrochemicals, wine, and other manufactured products.
In contrast, New Delhi is pushing for tariff concessions on its labour-intensive export industries, including textiles, leather, jewellery, chemicals, plastics, and agricultural goods like shrimp, bananas, grapes, oilseeds, and others. It is also seeking total exemption from the impending 26% reciprocal tariffs, while the base 10% import duty should remain.
Insiders indicate that the interim agreement could be phased in stages. The first phase would encompass a wide array of sectors, and additional talks could go on until October under the cover of a bigger Bilateral Trade Agreement (BTA).
The pressure on signing the agreement is partly fueled by the looming July 9 deadline. Trump recently reaffirmed last week that he would allow the tariffs suspension to expire. Addressing Fox News, he noted his administration would no longer accept trade deficits and was not likely to grant any more reprieves. "Whatever we want," he stated about the tariffs.
In spite of continued difficulties, both parties appear to be converging on several aspects of the potential agreement. Industry bodies have already been briefed by officials of India's Commerce Ministry that the initial phase of the deal is almost done and follow-up talks are on the cards in the coming months.
If the interim agreement is announced on time, it may allow both nations to sidestep an expensive trade standoff and set the stage for deeper economic engagement between the world's two biggest democracies.
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