New Delhi (TIP)- India and the US are continuing discussions on several bilateral issues, and New Delhi is hopeful that the two partners will soon resume formal trade talks — once there is a resolution of the primary issue, a steep 50% tariff on Indian goods, a government official said on Thursday, August 28.
The sixth round of negotiations, scheduled from August 25 in New Delhi, were postponed in the wake of the US government imposing a 25% secondary or punitive tariff on Indian exports because the country imports oil from Russia.
This tariff, which came into effect on Wednesday takes the overall tariff on Indian exports to the US to 50%, among the highest for a country. “Both need to be resolved to strike the deal,” the official added, asking not to be named.
According to the official, the impact of the US tariff measures is not severe for India because of two reasons – the Indian economy is relatively less dependent on exports and India’s domestic market is expanding very fast. “While about 10% of India’s GDP comes from exports, the share of the US is about 11-12% of that. Out of which only about half are impacted by the tariff move, which comes to 1.1-1.2%,” he explained.
The official added that exporters are pointing to a liquidity crunch and seeking measures to infuse liquidity, similar to steps taken during the Covid period. The government is considering such measures, the official said. The official also stated that India’s domestic market is growing fast and depends on imports worth over $720 billion. “This growing market can also absorb some of the items that used to go to the US,” he said, noting that sectors affected by tariffs such as gems and jewellery have lower value additions. “Big ticket reforms (by respective ministries) and proposed GST rate rationalisation are expected to boost consumption. India is a big market, and that is our strength,” he said.
“This does not mean the US tariff would not adversely impact. There could be some pain points and some of that would be addressed,” he added.
Beyond liquidity support, the government is considering trade diversification, free trade agreements (FTAs), export promotion measures (EPMs), and ease of doing business (EoDB) reforms.
Every ministry is working on big ticket reforms in their respective areas, including proposals to liberalise export-oriented units (EOU) and special economic zone (SEZ) provisions to boost the economy. “We are working on it.”
The government is consulting stakeholders and working on short-term, medium-term and long-term measures, though nothing is finalised as yet, this person added.
Meanwhile, US officials have continued to ratchet up their attack on India, with US Treasury Secretary Scott Bessent accusing India of “profiteering” by buying Russian oil cheap and selling the refined products; White House trade advisor Peter Navarro christening the Ukraine conflict “Modi’s war”; and Kevin Hassett, director of the National Economic Council criticising what he termed “India’s intransigence”.
After tariff troubles, India hopes to resume US trade discussions
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