For years, a comprehensive trade deal between India and the United States has been tantalisingly close, yet remains unfinished. Despite both nations sharing strategic goals, negotiators have hit a persistent impasse over several critical issues.
The Long and Winding Road
The ambition
for a robust bilateral trade agreement is not new. With bilateral trade in goods and services reaching over $142 billion by 2018, the economic relationship between the world's oldest and largest democracies is significant. The goal has been to reduce barriers, increase market access, and create a more predictable trade environment, potentially boosting bilateral trade to $500 billion by 2030. However, negotiations have been a rollercoaster of progress and setbacks. While officials from both sides have frequently expressed optimism about being in the 'final stages', the last mile has proven to be the hardest, with talks recently described as having reached a 'plateau'.
Agriculture: A Sacred Cow
A primary sticking point is agriculture, a politically sensitive sector in India. The U.S. has been pushing for greater access to India's vast market for its agricultural products, including dairy, poultry, apples, walnuts, and almonds. For India, this is a major red line. With millions of livelihoods dependent on farming, there are significant domestic pressures to protect the sector from what is seen as competition from heavily subsidised American industrial farms. Farmer organisations like the All India Kisan Sabha (AIKS) have warned of 'militant resistance' against any deal that opens up the dairy and soybean sectors, fearing it would undercut domestic prices and harm rural incomes. India has historically used high tariffs, some up to 150%, to shield its farmers, and negotiators are reluctant to cede ground here.
The Digital and Data Divide
In the modern economy, data is a crucial commodity, and its regulation is a major point of contention. The US has strongly objected to India's data localisation norms, which would require global technology companies to store Indian user data within the country's borders. American tech firms argue this increases operational costs, while India views it as essential for digital sovereignty and national security. Another flashpoint was India's digital services tax, or 'equalisation levy', which Washington argued was discriminatory against US tech giants. While India has since phased out this levy, the U.S. has sought firm commitments that similar taxes won't be reintroduced, and wants to negotiate a broader set of rules to remove barriers to digital trade.
Medical Devices and Price Caps
Healthcare is another battleground. India, in a bid to make medical devices more affordable, implemented price caps on items like coronary stents and knee implants. This move significantly impacted US medical device manufacturers, who are major suppliers to the Indian market and argue that the caps stifle innovation and deny them equitable market access. This issue is particularly critical for New Delhi, which views affordable medical devices as key to the success of its flagship health programme, Ayushman Bharat. While India has signalled a willingness to address long-standing barriers, negotiators remain cautious about compromising on healthcare affordability.
Tariffs, Geopolitics, and Trust
A complex web of tariffs and retaliatory measures has further complicated the talks. A framework discussed in early 2026 to lower US tariffs on Indian goods from as high as 50% to 18% was thrown into uncertainty by a US Supreme Court ruling, leaving India unsure of what Washington can now offer in return for concessions. This has created a trust deficit, with India seeking predictability and assurances that it won't be left at a disadvantage compared to competitors like Vietnam or Bangladesh. Adding another layer of complexity is geopolitics. The US has raised concerns over India's continued purchases of Russian oil, which could potentially trigger new tariffs and has turned an economic dispute into a geopolitical one.
