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Mint
06-07-2025
- Business
- Mint
As India and US gear up for trade deal, New Delhi seeks balance, Washington eyes greater market access
New Delhi: As India and the US prepare to seal a deal aimed at boosting bilateral trade, New Delhi is aiming for a balanced outcome while Washington is focused on securing deeper market access for its goods. Though India has drawn red lines around its sensitive sectors—agriculture, dairy, and genetically modified (GM) food—the US continues to push for significant concessions. It has signalled a potential 6% duty relief from the 16% reciprocal tariff hike announced on 2 April, which remains on hold until 9 July. Also read | Trade agreements struck earlier have taught India how to raise its game However, three people familiar with the matter said that even if partial relief is granted, the baseline 10% tariff will continue, and an additional 10% duty—carved out from the original 16%—could still be imposed if India does not allow greater market access to these redlined sectors, something Indian negotiators have firmly rejected. This uncertainty follows Commerce Minister Piyush Goyal's statement on Friday that India is ready to sign the pact 'only if it is in the interest of the country." Limited tangible gains Indian officials are concerned that despite multiple policy shifts aimed at signalling openness, tangible gains from Washington remain limited. 'India has made several gestures, starting with the Union Budget, to improve the trade climate. But feedback from the US side suggests their focus remains largely on pushing exports," said the first of the three people cited above. India is also reassessing the timing and framing of pending policy measures thought to be sensitive to American tech interests, including the Digital Competition Bill, a comprehensive e-commerce framework, and new income attribution rules for non-resident enterprises, Mint reported on 30 June. The recalibrations are being considered to align with broader trade deal goals and demonstrate India's commitment to regulatory transparency and investment facilitation. Also read | US meat, seafood to garnish India-US bilateral trade agreement New Delhi aims to finalize the agreement before the US's 9 July reciprocal tariffs deadline. The US wants India to reduce duties on its agricultural and dairy goods, ease entry barriers for shrimp, and eliminate non-tariff curbs on dairy exports. The US remains India's largest export market. In FY24, India exported goods worth $77.52 billion to the US—18% of total exports ($433 billion)—while imports stood at $42.2 billion, resulting in a $35.32 billion trade surplus. In FY25, exports to the US rose 11.6% to $86.51 billion, while imports grew 7.4% to $45.33 billion, widening the surplus to $41.18 billion, commerce ministry data showed. Moves to ease tensions In a calibrated move to ease trade tensions, India announced a round of tariff cuts in the Union Budget presented on 1 February—before the formal launch of the Bilateral Trade Agreement (BTA) through a joint statement on 13 February. The average customs duty was reduced from 11.65% to 10.66%, with cuts spread across technology, automobiles, industrial inputs, and space-linked imports. Duties on motorcycles were cut from 50% to 40% (for engines below 1,600cc) and to 30% (above 1,600cc). Mobile phone parts and LCD TVs also saw reductions, while import taxes on satellite installation equipment—including spares—were eliminated. Lithium-ion batteries were reclassified as core auto components, making them eligible for incentives. Duties on synthetic flavouring essences were slashed from 100% to 20%, fish hydrolysate from 15% to 5%, and several waste and scrap items saw their 5% duty eliminated—benefiting $2.5 billion in US exports to India. Also read | India, US aim to finalize first tranche of trade deal by autumn: FM Among the politically sensitive concessions, bourbon whiskey saw its import duty reduced from 150% to 100%, just before the Prime Minister's visit to the US in February. Harley-Davidson motorcycles also benefited from a tariff cut—from 50% to 30%—announced in the Union Budget. Ethernet switches under the 'carrier-grade (others)' category—a major US export segment worth $653 million in FY24—saw duties halved from 20% to 10%. India also withdrew the 6% equalization levy or 'Google tax' on foreign digital firms, a key concern for US companies. It revised safe harbour rules to offer more tax incentives to EV and battery manufacturers. Lithium-ion batteries for EVs and hybrids were reclassified to qualify for additional incentives. Not at cost of critical sectors 'There's a noticeable shift in India's approach to trade negotiations with the US compared to earlier rounds. While this may be part of a broader global positioning strategy, it should not come at the cost of India's critical sectors," said a former commerce ministry official, the second of the three people cited earlier, who requested anonymity. 'It now appears that negotiators are making greater efforts to seal a deal—unlike in earlier times, when the stance was more firm and clear: if the trading partner didn't agree to core interests, India was willing to walk away," this official said. 'Despite Trump's frequent criticism of India's tariff policies, duty reductions suggest a shift towards facilitating US exports," said Ajay Srivastava, former Indian Trade Service officer and co-founder of the Global Trade Research Initiative (GTRI). 'India is making calculated moves to ease trade amid a tense global environment, especially in sectors like technology, auto, electronics, and waste recycling," he said. Also read | 'Zero-for-Zero' tariffs unlikely under proposed India-US trade deal: Report Another move aimed at supporting bilateral trade came in March, when the Directorate General of Foreign Trade (DGFT) extended the export obligation period for walnuts under the Advance Authorization scheme from 180 days to 18 months—bringing it in line with most other products. This is expected to benefit the US, which accounted for 66.8% of India's walnut imports in 2024, valued at $1.07 billion. 'With a longer timeframe to process and re-export walnuts, Indian traders can plan imports more efficiently," Srivastava said. Despite these gestures, Indian officials say they are cautious about fast-tracking policies that might compromise regulatory freedom. One such measure is the e-commerce policy, which has drawn strong interest from Amazon and Walmart-owned Flipkart. 'The policy, originally due in 2023, is likely to be deferred," said the third person cited above. 'Given the shifting global scenario, this isn't the right time." Clearing the decks for the entry of US satcom major Starlink is also seen as a measure to woo the US leadership. The move signals India's willingness to accommodate key American business interests, especially in strategic sectors like telecommunications and digital infrastructure. Unlikely to benefit Trade experts believe these concessions are modest and won't significantly narrow the US trade deficit—the key objective behind Trump's reciprocal tariff drive. 'President Trump expects much bigger gains from India. These are minor in his view—crumbs, not concessions," said Biswajit Dhar, economist and trade expert at the Council for Social Development. 'His priority is cutting the trade deficit, and that can only happen if the US substantially increases exports to India." Washington has shown no sign of easing tariffs on Indian metal exports. As first reported by Mint on 3 April, India opted for dialogue over retaliation. As per another Mint's report, the first tranche of the BTA had reached Trump's desk after being cleared by US Trade Representative Jamieson Greer. Also read | India, US move on trade deal, no talks on reciprocal tariffs However, optimism has faded amid signs that Trump 2.0-era tariffs of 50% on Indian steel and aluminium may remain in force during this phase of the agreement. 'The current 50% US tariff on Indian steel is likely to stay unless the BTA explicitly includes a waiver—similar to what the US offered the UK. Without such a concession, Indian steel exports to the US will likely remain stagnant. While the short-term revenue impact may not be severe, it represents a missed strategic opportunity in a high-value market. Countries like South Korea, Japan, and Vietnam, which may secure preferential access, could gain at India's expense," said Ravi Saxena, CEO and founder of Wonderchef, a kitchen appliance company.
Mint
30-06-2025
- Business
- Mint
As US trade deal nears, India reviews timing, scope of digital economy policy
New Delhi: As India and the US move closer to finalising a bilateral trade pact ahead of the 9 July tariff deadline, New Delhi is reassessing the timing and contours of pending policy measures that are sensitive to the interests of American tech giants. These include the proposed Digital Competition Bill, a comprehensive e-commerce framework, and new income attribution rules for non-resident enterprises, according to three people familiar with the matter. The recalibrations are being weighed to ensure the policy measures align with the broader objectives of the India-US trade deal and reflect India's commitment to a trust-based regulatory framework and investment requirements, one of them said. 'Policy measures which are on the drawing board can also be a bargaining chip in bilateral treaty negotiations," said the second person quoted above. Both of them spoke on condition of anonymity. The ministry of finance, the departments for promotion of industry and internal trade and commerce, and the Central Board of Direct Taxes (CBDT) did not reply to queries emailed on Friday. India has offered several concessions to US exporters of goods and services in the previous two Union budgets, including customs duty reductions and scrapping of the equalisation levy on digital services rendered to Indian businesses by non-resident entities such as tech giants Google and Meta. New Delhi is looking to finalise a bilateral agreement with Washington before the US's 9 July reciprocal tariffs deadline. The US wants India to significantly reduce duties on American agricultural goods, dairy products, and shrimp, and remove non-tariff barriers restricting US dairy exports. Washington, too, is under pressure to ensure the India-US trade deal passes before the deadline. A 26% reciprocal tariff on Indian exports into the US, which includes the 10% universal baseline tariff that now applies to Indian exports, along with tariffs on imports from other countries, could push up retail price inflation in the US. Concerns over the impact of reciprocal tariffs on inflation are already top on the mind of Federal Reserve Chair Jerome Powell, who has refused to buckle under pressure from President Trump to cut the benchmark lending rate. President Trump is pitching for rate cuts which could help lower the government's interest payments and the budget deficit. India's cautious approach Among the measures being reviewed is India's proposed Digital Competition Bill which seeks to introduce an ex-ante or forward-looking approach to regulating the digital economy. This will mandate influential tech firms to follow a code of conduct. The draft Bill, as it is framed now, will affect digital economy firms' ability to show targeted advertisements and the way people use Google services like maps, Mint reported on 24 April and 7 June, respectively, last year. The government is also reviewing the proposed profit attribution rules to be rolled out by the Income Tax department. These are meant to levy tax on non-resident companies which have a 'significant economic presence' in India, defined on the basis of transaction value and user base. But India's double tax avoidance deal with the US makes it difficult to tax these entities, as only those defined as having a 'permanent establishment' here under the treaty can be taxed. India abolished other efforts to tax tech giants catering to Indian customers remotely by removing the equalisation levy (6% on digital advertisements and 2% on e-commerce) over the last few months to ease trade tensions with the US and to remain aligned with OECD's framework to check tax base erosion, said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm. 'However, it still has domestic rules like the Significant Economic Presence (SEP) concept and draft profit attribution rules under Section 9 of the Income Tax Act and Rule 10. For now, the profit attribution rules have not been made effective, and US-based companies can still claim tax treaty benefits in case of a SEP existing in India unless they have a permanent establishment here," said Maheshwari. On Saturday, Canada rescinded a 3% digital services tax on big tech companies that was to take effect on 30 June. This was in response to Trump's announcement on Friday that he was cutting off trade talks with Canada for going ahead with this tax. E-commerce and FDI India's proposed comprehensive e-commerce policy, which has drawn strong interest from global entities such as Amazon and Walmart, is another measure under review as the countries reassess priorities in the wake of an eventful regime change in the US. 'This may not be the right time to push ahead with the e-commerce policy discussion, given the shifting global geopolitical scenario," a senior government official said. India is also considering a tweak to its foreign direct investment (FDI) policy in retail to allow foreign investment in building inventory, which is currently permitted only for domestic players. The idea is to enable US-based retailers to invest in warehousing infrastructure. The Digital Personal Data Protection Act of 2023 took into account some of the concerns of digital economy firms. 'It is true that a lot of discussions have been happening on issues like the Digital Competition Bill and the e-commerce policy. Some of these developments may also come up during bilateral discussions with the relevant foreign governments," said Amol Kulkarni, director of research at CUTS International, a non-profit, non-governmental organization working on public interest issues. The timing and form of these policy developments can offer India leverage in these discussions, Kulkarni said. "It is for the government to strike a fine balance in these talks taking into consideration the need for policy certainty and predictability and the gains that could come to the overall economy from specific policies," said Kulkarni. 'For instance, the regulation of cross border data flow had been subject to intense negotiation and the final framing under the Digital Personal Data Protection Act 2023 was quite accommodating, however, the requirements under the Digital Personal Data Protection Rules 2025 introduce some ambiguities, which could have been avoided, in the interest of policy certainty and predictability," said Kulkarni. After signing a major tariff deal with China, President Trump has hinted at a 'big trade deal' with India too. Whether India's moves so far, including removal of the equalisation levy and pause on contentious digital rules, are enough to soften the US stance remains to be seen, said Maheshwari.
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Business Standard
01-05-2025
- Business
- Business Standard
US warning against EU tech fines casts shadow over India's digital Bill
Group representing American tech industry calls proposed Indian legislation as a trade barrier Listen to This Article The Trump White House's statement that European Union fines on Apple and Meta last week were 'a novel form of economic extortion' could have a bearing on India's draft Digital Competition Bill (DCB), which is modelled on EU legislation. The Computer & Communications Industry Association (CCIA), which counts Google, Amazon and Meta among its members, last week petitioned the United States (US) government against DCB. The EU on April 23 handed out its first-ever penalties — $500 million on Apple and $200 million on Meta — under the Digital Markets Act (DMA), evoking a sharp reaction from the White House.
