Digital Trade to Dairy: India-US Focus Areas in New Deal

With geopolitical tensions and global trade dynamics shifting rapidly, India and the United States are working against the clock to finalize a partial bilateral trade agreement. The goal? To cement progress before the 90-day pause on reciprocal tariffs—announced by former US President Donald Trump and recently revived under ongoing negotiations—expires.

According to senior government officials, the trade pact aims to address three key focus areas: tariff reductions, digital trade facilitation, and expanded market access. While not as comprehensive as a full free trade agreement (FTA), this partial deal could lay the groundwork for future economic collaboration, especially as India navigates a multipolar global order and the US counters China’s influence in Asia.

What Is a Partial Bilateral Trade Deal?

A partial bilateral trade agreement is a focused pact between countries that covers specific sectors or issues, unlike a full FTA, which encompasses a broader spectrum of trade and investment rules. This deal is often pursued when time is limited or when a full FTA is politically or administratively infeasible.

In this case, the 90-day pause is a strategic window to resolve trade frictions that have plagued Indo-US relations over the past few years. The pause was initiated in light of Trump-era tariffs and retaliations—particularly those under Section 232 (steel and aluminium) and Section 301 (digital services tax and e-commerce).  Source: Business Standard 

Why Now? The Strategic Importance of the 90-Day Window

This narrow window comes at a critical time. According to Statista, US-India bilateral trade in goods was valued at $131 billion in 2023, making the US India’s largest trading partner. However, trade imbalances and tariff-related tensions have been persistent issues.  

Year	US-India Trade Volume (in $B)
2019	92.1
2021	112.6
2023	131

The Three Fronts India Will Focus On

1. Tariff Reductions on Key Sectors

India is pushing for tariff concessions, particularly on exports such as textiles, pharmaceuticals, leather, and engineering goods. The US, in turn, is interested in reducing duties on high-end tech products, renewable energy components, and agricultural exports like almonds and apples.

For example:

• Almonds: India currently imposes a tariff of ₹120/kg on US almonds.
• Medical Devices: The US seeks the removal of India’s price caps on stents and knee implants. Source: News18

2. Digital Trade & E-Commerce Regulations

Digital trade remains a sticky point, especially around data localization and India’s evolving stance on digital sovereignty. The US is keen to ensure that cross-border data flow rules align with global norms and not disadvantage American tech giants like Amazon, Google, and Meta.

India, meanwhile, is cautious, wanting to protect domestic digital infrastructure and the interests of local startups.

• The Indian e-commerce market is projected to reach $188 billion by 2025 (Source: IBEF).
• The US wants fewer barriers to digital payments, cloud computing, and fintech operations.  Source: Moneycontrol

3. Expanded Market Access for Both Sides

India also aims for smoother access to the US market for its agricultural goods, textiles, and auto components. In return, the US pushes for broader access to India’s service sector, particularly financial services and education.

The proposed deal may revive discussions around reinstating India’s eligibility under the US Generalized System of Preferences (GSP), which allowed duty-free entry for $5.6 billion worth of Indian goods until its withdrawal in 2019.

• India’s Exports to the US (2023): $78 billion
• US Exports to India (2023): $53 billion (Source: USTR, 2024)  

What’s at Stake Economically (Expanded)

A successful partial trade agreement between India and the US could be more than symbolic—it could have real economic consequences for GDP growth, trade diversification, and supply chain resilience. 

1. Boost to India’s Export Competitiveness

India’s exports to the US stood at $78 billion in 2023, accounting for nearly 18% of its total exports. However, high US tariffs and the removal of India from the Generalized System of Preferences (GSP) in 2019 hurt competitiveness in sectors like textiles, gems and jewelry, and leather.

If GSP benefits are reinstated or tariff reductions are agreed upon:

• Indian exports could rise by $8–10 billion annually, based on industry estimates from FIEO (Federation of Indian Export Organisations). 

This could translate into a 0.25% boost to India’s GDP, particularly from MSME-driven export sectors that were previously GSP beneficiaries. 

2. Realignment of Global Supply Chains

With the US decoupling from China and looking for alternative partners, India has a strategic opportunity to become a reliable supply chain node. According to a 2024 McKinsey Global Institute report, 15–20% of global trade could shift from China to other Asian economies by 2030. With its vast labor force and improving infrastructure, India is a natural candidate—provided trade barriers are reduced.

A smoother trade framework with the US could:

• Accelerate FDI inflows in manufacturing (PLI-linked sectors like electronics and pharma).
• Encourage American firms to consider India over Vietnam or Mexico for high-value production and R&D. 

3. Digital Economy Integration

India’s digital economy is projected to hit $1 trillion by 2030 (MeitY estimate). US tech firms are deeply invested—Amazon has committed over $26 billion in India, while Google and Microsoft are expanding cloud and AI infrastructure.

If digital trade norms are harmonized:

• India could attract more tech FDI, particularly in SaaS, AI, and fintech.
• UPI and RuPay could be integrated with US systems, enabling smoother cross-border payments.

However, without alignment on data governance, taxation, and localization, these benefits could remain unrealized.

Challenges Ahead (Expanded)

While negotiators are racing against time, several entrenched obstacles could derail or dilute the scope of the agreement.

1. Data Sovereignty vs Free Digital Trade

The US strongly opposes India’s data localization policies, which require companies to store certain data domestically. These policies are part of India’s broader goal of securing its digital infrastructure and encouraging domestic cloud development. However, they clash with US digital trade principles, which advocate unrestricted cross-border data flows.

• The US fears that India’s policies could set a precedent for digital protectionism globally.  India, meanwhile, cites privacy, national security, and local job creation as key reasons for its stance.  Unless a middle ground is found—perhaps through carve-outs or sector-specific rules—digital trade provisions could remain unresolved.

2. Agricultural Market Access & Domestic Sensitivities

The US is pushing for greater access to India’s large consumer market for dairy, poultry, and agricultural products. But:

• India has long protected its dairy sector, citing livelihood concerns for 80 million farmers, most of whom operate on a subsistence level. US demands to ease restrictions on genetically modified (GM) foods and hormone-treated meat also face strong domestic opposition.

These are politically sensitive areas, especially with Indian elections on the horizon, making broad agricultural concessions unlikely.

3. Pharma & Medical Devices Pricing

The US pharmaceutical and medical device lobbies urge India to relax price controls on products like cardiac stents and knee implants. India’s National Pharmaceutical Pricing Authority (NPPA) caps prices to make healthcare more affordable for its population.

However, a rollback on price controls could spark public backlash in India. While American manufacturers see it as a necessary market reform, India sees price regulation as a public health imperative.

4. Labor and Environmental Standards

Future phases of the deal—if not the current partial version—may include US-style labor and environmental standards. Indian exporters, especially MSMEs, fear such clauses would increase compliance costs and reduce competitiveness.

In particular:

• Textile and apparel exporters fear losing cost advantages.
• Small manufacturers lack the infrastructure to meet complex audit and reporting norms.

These issues could become bigger sticking points in a full-fledged FTA.

5. Geopolitical and Electoral Timing

The 90-day window overlaps with an election-heavy calendar in both countries. India is heading into key state polls, and the US is preparing for its 2024 Presidential election cycle. This creates a narrow bandwidth for political risk:

• A change in US administration could stall or reverse negotiations. In India, any perception of ceding economic ground to foreign players could be politically costly.

6. Lack of Dispute Settlement Mechanism

Unlike FTAs, partial trade deals often lack a formal dispute resolution framework, increasing uncertainty. If either side reneges on commitments or interprets terms differently, enforcement becomes difficult without a WTO-like mechanism or arbitration clause.

Challenges Ahead

While optimism is high, hurdles remain:

• India’s data protection laws and pricing controls on medical devices are potential deal-breakers.
• The US will unlikely reintroduce GSP without structural reforms in India’s tariff policy.
• The global political environment—especially with US elections looming—adds unpredictability. 

Still, negotiators are hopeful that a narrowly defined, economically beneficial pact can be reached within the deadline.

Final Thoughts

India’s pursuit of a partial bilateral trade deal with the US underlines a larger strategic pivot—towards trade pragmatism and global competitiveness. Economic diplomacy is becoming just as crucial as military alliances in a multipolar world. A successful outcome will ease long-standing irritants and prepare the ground for a more comprehensive agreement.  

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