Indian industries see opportunity in Trump's trade goals

NEW DELHI: Indian industry and trade experts see an opportunity to expand business with the U.S. after Prime Minister Narendra Modi met President Donald Trump, despite uncertainties over reciprocal tariffs and thanks to steps taken in the past few years.

India and the U.S. agreed on Thursday to resume talks to clinch a trade deal later this year, a proposal that did not bear fruit during Trump’s first term, with a goal of more than doubling bilateral trade to $500 billion this decade. India has promised to buy more U.S. defence, energy and other products.

New Delhi has in the past largely dithered on trade deals fearing an onslaught of imports that could hurt domestic producers, but Indian companies are much more competitive now, partly due to government incentives like corporate tax cuts and manufacturers’ own initiatives to step up quality and widen their global distribution network, industry leaders said.

“Absolutely, to resume talks to clinch a trade deal later this year,” said Ajay Sahai, director general at the Federation of India Export Organisations (FIEO), representing more than 37,000 exporters. “The economy has become more competitive in last four years.”

India’s manufacturers in areas including auto components, garments, electronics and jewellery have moved to high-quality products and expanded distribution in North America, as U.S. companies looked at alternatives to China in the past few years, he said.

In the past few years, the government has rolled out billions of dollars in corporate tax cuts and other incentives for domestic manufacturers to enhance their competitiveness. It has also invested in roads and ports, bringing down costs for companies.

“Our exports to the U.S. would definitely go up if there is a bilateral deal as we have invested in new products, technologies and tied with buyers,” said Pankaj Chadha, chairman of Engineering Export Promotion Council, and an exporter of engineering goods worth $20 million a year to the U.S.

MODI’S MOVES

Indian manufacturers especially in labour-intensive areas such as textiles, footwear, engineering goods, solar panels, and electronics could particularly benefit from a trade deal, Sahai said, as they do not directly compete with the U.S.

India’s goods and services trade with the U.S., the country’s largest trading partner, jumped more than a third in five years through 2023 to $190 billion, with a surplus of $50 billion in favour of India.

U.S.’ trade deficit with India has been growing over the years

India’s goods exports to the U.S was $73.8 billion in 2024, including medicines, telecom instruments, jewellery, petroleum products, garments, and engineering goods.

Ajay Srivastava, founder of New Delhi think tank Global Trade Research Initiative, said that for nearly 75% of U.S. exports to India, like petroleum products and chemicals, average tariffs are already below 5%, so a trade deal that could scrap duties is unlikely to be a major concern.

Indian government officials, however, are waiting for the return of Modi to consult local industry leaders to address their concerns in any trade deal, a government adviser said on the condition of anonymity.

Analysts said after India’s tariff cuts on various items such as high-end bikes in the annual budget this month, it could go for further reductions, excluding in the politically sensitive agricultural sector, to boost bilateral trade.

“PM Modi may be able to wangle some exceptions/favourable deals, but that would likely entail lowering import duties for some products, as well as higher Indian purchases of U.S. goods, with defence and energy being prime sectors,” said Madhavi Arora, chief economist at brokerage Emkay Global.