New Delhi: What does the trade deal with US mean for India? Key points for Delhi in the details so far
Less than a week after the announcement of a trade deal in principle, India and the United States have issued a joint statement which gives more details about what exactly has been agreed upon.
Some details will still require more clarification, and some items have been left for future negotiations. Follow live updates related to trade deal here.
Of the existing 50% US tariffs on India, 25% were on account of the latter’s Russian oil purchase. It was both unfair and inconsistent. The former because the Biden administration was fine with India buying Russian crude to prevent an oil market disruption, and the latter because bigger buyers of Russian oil such as China were not slapped with this tariff.
India always had the option of declaring an end of Russian oil purchases and getting tariffs back to 25% from 50%.
Another order issued with the joint statement shows that the 25% additional tariffs are only being revoked because “India has committed to stop directly or indirectly importing Russian Federation oil, has represented that it will purchase United States energy products from the United States, and has recently committed to a framework with the United States to expand defense cooperation over the next 10 years”.
The statement further says that the US “shall monitor whether India resumes directly or indirectly importing Russian Federation oil” and any such finding can lead to “additional action” including reimposition of the 25% tariff.
To be sure, India has maintained that its oil purchases are driven by “market considerations” rather than being wedded to an unmoving resolve to buy from Russia and that these have anyway fallen sharply recently.
JP Morgan’s commodities team estimates that India’s Russian oil purchases fell from 34% of total purchases in November to 20% in January.
India is not going to remove its tariff barriers in a blanket manner as far as farm and dairy products are concerned. These have always been considered a key livelihood concern rather than just a trade-related matter by the Indian side in almost all trade negotiations.
The joint statement mentions a “wide range” of agricultural products such as “dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits”.
These are not categories which will potentially have a large impact on Indian farming, although some targeted headwinds might exist.
Commitments such as in soybean, could also interfere with India’s counter-cyclical policies to deal with domestic food inflation.
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