Zero Duty Access Unveiled
In a significant development for Indian commerce, India's Commerce Minister Piyush Goyal has announced that approximately 50% of the nation's exports to
the United States will now benefit from zero-duty access. This landmark tariff reduction, stemming from a US executive order anticipated to take effect in the coming days, is poised to provide a substantial uplift to India's economy, particularly its Micro, Small, and Medium Enterprises (MSMEs) and labor-intensive industries. While a portion of exports will continue to face specific sectoral tariffs, such as the US Section 232 tariffs on steel and aluminum, a considerable segment will now enjoy an unimpeded entry into the American market. The remaining half of Indian exports will be subject to varied tariff rates, with roughly 35% facing approximately 18% duties, and an additional 10-15%, including critical items like steel and aluminum, subject to the existing Section 232 tariffs. This calibrated approach ensures that while broad market access is expanded, specific industry considerations are also addressed.
MSME Sector Gains Big
The newly established zero-duty framework is set to revolutionize numerous sectors crucial to India's economic backbone, especially those driven by MSMEs and labor. Industries such as textiles, auto components, machinery parts, engineering goods, leather footwear, sports goods, toys, furniture, handicrafts, and handlooms are identified as prime beneficiaries. These sectors, often characterized by their labor-intensive nature and reliance on smaller enterprises, will experience an immediate and positive impact due to the elimination of import duties on their products entering the US market. This preferential access will likely lead to increased production, greater export volumes, and job creation within these vital segments of the Indian economy. The strategic inclusion of these categories underscores the agreement's focus on fostering inclusive growth and strengthening India's position in global value chains.
Product Categories Flourish
A wide array of Indian products are slated to benefit from the zero-duty access to the US market, spanning several key categories. In the agriculture and food products domain, items such as spices, tea, coffee, various nuts, fruits like avocados and bananas, processed foods, and citrus juices will see enhanced market penetration. The gems and jewellery sector, particularly gems and diamonds, will also experience a boost. Consumer goods, including clocks and watches, essential oils, and select home décor items, are set to gain. Furthermore, industrial products like aluminium oxides, zinc oxides, and inorganic chemicals, along with miscellaneous industrial and other products encompassing seeds, paper articles, and natural rubber, will find it easier to reach American consumers. This broad scope ensures that diverse segments of India's export basket are well-positioned for growth.
Automotive & Sensitive Items
The trade deal also includes specific provisions for the automotive sector and meticulously addresses India's sensitive agricultural products. Tariffs on American motorcycles in the 800cc–1,600cc segment are set to be reduced to zero, a move that does not currently impact Indian manufacturers who do not operate in this engine capacity range. Similarly, tariffs on large diesel cars above 2,500cc and petrol cars above 3,000cc will see a phased reduction. Crucially, India has maintained its stance on protecting core agricultural interests. Sensitive items such as dairy, poultry, meat, rice, wheat, sugar, pulses, and all genetically modified products remain outside the scope of this agreement. Fruits like bananas and cherries, along with honey, ethanol, and tobacco, have also been excluded, ensuring that domestic producers in these vital areas are safeguarded.
Agricultural Exports & Apples
The trade agreement is anticipated to expand export opportunities for India's farm and fisheries sectors, with the potential for export revenues to double from the current aggregate of nearly $54-55 billion. Regarding specific produce, Indian apples will be subject to a minimum import price of ₹80 per kg and a duty of ₹20, establishing a price floor approximately 33% higher than apples from other sources, thereby providing robust protection to domestic growers. This measure is particularly significant as India imports a substantial volume of apples annually, with the US being offered an import quota that is set below its current export volumes to India. This careful balancing act aims to leverage international markets while prioritizing the welfare of local agricultural stakeholders and ensuring India's food security.
