A landmark India-US trade agreement is set to lower the effective tariff burden on Indian goods entering the American market to 12-13 percent, provided reciprocal duties hold at 18 percent. Bank of America (BofA) Global Research’s latest report paints a promising picture for bilateral trade dynamics.
Electronics dominate India’s US-bound exports at 40-45 percent and benefit from zero base tariffs. Even with Section 232 duties included, the blended rate should remain competitively low, around 12 percent plus a marginal increase. This positions India favorably against global competitors.
The report flags potential sticking points: Section 232 tariffs on automobiles, components, steel, iron, and aluminum might persist at 25 percent, as the initial deal phase sidesteps these specifics. Exporters in these segments will need to navigate ongoing pressures.
On the upside, labor-heavy sectors like textiles and precious stones & jewelry are primed for explosive growth. India’s pledge to import $500 billion in US products over five years—equating to $100 billion yearly—is realistic, considering the nation’s $750 billion annual import tally where US share is a modest 6 percent.
Shifting energy purchases to the US from suppliers like Russia will barely dent the current account, the analysis notes. Coupled with strengthening services exports, India could achieve a current account surplus by late 2025, marking a robust economic turnaround.
As negotiations advance, this deal underscores a strategic pivot, enhancing market access while safeguarding India’s fiscal health.