The proposed India–US Interim Trade Agreement (ITA) marks a strategic recalibration of bilateral economic relations. Critically examine. (10M, 150 Words)

India–US Interim Trade Agreement (ITA) in 2026 to deliver early trade gains while negotiating a full Bilateral Trade Agreement (BTA). It aims to deliver early harvest gains while paving the way for a comprehensive Bilateral Trade Agreement (BTA).

Key Features of the India–US ITA:

1. Tariff rationalisation:
   1. India to reduce/eliminate tariffs on US industrial goods and selected agri-food items such as nuts, fruits, soybean oil, wine, and spirits.
   1. US reduced effective tariffs on Indian exports from 50% to 18%, restoring competitiveness.
2. Non-tariff barrier (NTB) easing: India to address licensing delays, standards-related barriers, especially in medical devices, ICT, agri-products.
3. Sectoral concessions:
   1. US removed tariffs on generic pharmaceuticals, gems & diamonds, aircraft parts.
   1. Preferential quota for Indian auto parts at lower tariffs.
4. Strategic purchase commitment: India pledged to buy $500 billion of US goods over 5 years (energy, aircraft, tech, coking coal).

Deal enables recalibration of bilateral economic relations:

1. Export revival: Labour-intensive sectors (textiles, leather, gems) regain price edge vs competitors like Vietnam & Bangladesh (19–20% tariffs).
2. Supply-chain resilience: Reinforces India’s role in “China+1” strategy and trusted value chains.
3. Energy & technology alignment: Shift toward US energy supplies; deeper cooperation in GPUs, aviation, nuclear, data centres.
4. Macroeconomic stability: Reduced trade uncertainty helped stabilise the rupee and boosted equity markets (Sensex/Nifty).

Key Challenges:

1. Agricultural sensitivities: Fear of subsidised US imports affecting Indian farmers; farmer unions (e.g., SKM) opposed concessions.
2. Strategic autonomy: Reduced Russian oil imports may strain India–Russia defence ties (e.g., S-400 spares).
3. MSME pressure: Near-zero tariffs on US machinery risk undercutting domestic manufacturers.
4. Non-tariff hurdles: Strict US SPS/TBT standards continue to restrict Indian agri and seafood exports.
5. Import bill risk: Higher-priced US energy could widen Current Account Deficit (India imports 88% of oil).

Way Forward:

1. Calibrated liberalisation: Phase tariff cuts; ring-fence sensitive sectors (dairy, staples).
2. MSME transition package: Technology upgradation, credit, and skilling to compete with imports.
3. Robust SPS/TBT mechanism: Joint committee to prevent disguised protectionism.
4. Diversification strategy: Parallel FTAs (EU, UK, Gulf) to avoid over-dependence.
5. Institutional safeguards: Clear dispute resolution and monitoring for ITA implementation.

Conclusion:

The ITA is more strategic than transactional, aligning trade with geopolitics and supply-chain resilience. It aims at converting interim gains into a credible, equitable BTA. Done right, it can anchor India as a trusted manufacturing and technology partner; done hastily, it risks asymmetric exposure.

‘+1’ Value-Addition:

• India–US bilateral trade reached USD 191 billion (2023), making the US India’s largest trading partner.
• Indian textile exports to the US fell 20% in 2025 after tariffs peaked near 50%.
• India imports 88% of crude oil; discounted Russian oil saved USD 25–30 billion (2022–24).
• US FDI into Indian manufacturing rose 22% in FY24 amid supply-chain de-risking.
• India supplies 40% of generic drugs consumed in the US, thus tariff relief has public-health gains.

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