As India, US Close In On Mega Trade Deal, A Look At Its Immediate Impact

India and the United States are on a cusp of an agreement that will reshape commerce between the two largest democracies in the world. Negotiations for the pact, that are at an advanced stage, aim to take the annual bilateral trade between the two countries from the current $190 billion to a massive $500 billion by 2030 - and hence aptly titled 'Mission 500'.

After his recent meeting with India's trade minister Piyush Goyal, US commerce secretary Howard Lutnick said "India has one of the most extraordinary economies".

"The key that makes an extraordinary economy is the determination of the people. How much do your people care about being in business? How entrepreneurial are they? How much do they drive to be better for their families?" he said, adding that "From what I know about India, the core population of India has that drive and ambition, and that's why the Indian economy will always continue to grow and thrive because it has that from the underpinning and so you can do things in India that many other countries, you just can't get done."

CLOSE TO A DEAL

He went on to say that India and the United States are close to finalising a trade pact. "I think to be in a very, very good place, you should expect a deal between the United States and India in the not-too-distant future because I think we found a place that really works for both countries." His comments - that a deal is on the anvil is indicative of the rapid progress the two countries have made in negotiations that witnessed many roadblocks, including punitive reciprocal tariffs imposed by President Trump.

Though it has been many years in the making, the deal could prove to be a game changer for India. Several sectors like pharmaceuticals and agriculture which have high exposure in the US market are set to be impacted significantly. Experts believe there is a significant upside for India's agricultural exports, which are currently valued at $4 billion.

'MISSION 500'

'Mission 500' is being viewed by stakeholders as more than just a trade pact. It is being seen as a vision for greater bilateral investment in both countries, as policymakers streamline processes allowing for easier movement of capital.

Greater flow of capital and investments, coupled with higher access to American markets will create important avenues of growth for Indian businesses. While goods from sectors like engineering - which is one of the largest in terms of export to the US - will benefit, the true potential for growth lies in labour intensive sectors like footwear, garments, textiles, and electronics that will act as a catalyst for broad-based growth.

IMMEDIATE IMPACT

For Indian consumers, the pact will allow American products including high-end fashion brands to become more affordable. Duty cuts are likely to make several American FMCG or fast-moving consumer goods cheaper as well. This includes dairy products from brands like Danone and Land O'Lakes. The US alcobev industry will also gain significantly, with Bourbon whiskey brands like Jack Daniels and Jim Beam seeing a drop in prices in the Indian market.

Once the deal fructifies, it will likely lead to greater opportunities for India and the US to align with global supply chains. More so since China tariffs remain high, affecting investor sentiment and global businesses.

While the broad outlook for the trade pact remains positive, for Indian policymakers twin concerns remain. Free flow of labour and data remains a challenge due to the divergent views of New Delhi and Washington partly because of the present political climate in America.

After concluding a crucial trade pact with the UK, India is now giving priority to having trade agreements with both the US and the European Union - the two largest trading partners for New Delhi. Speaking about this, trade minister Piyush Goyal said last week that "We are well on track in our bilateral trade agreement with the US and making fast progress with EU."

India's economic forecast has said that a successful trade pact with the US will "turn the current headwinds into tailwinds".