US-India trade deal removes tariff overhang, clears air for investors: Nisha Biswal

The interim trade agreement announced between India and the United States has helped ease uncertainty in the bilateral economic relationship and removed a key overhang for investors, according to Nisha Biswal, Partner at the Asia Group.

Speaking to CNBC-TV18 after US President Donald Trump announced the deal, Biswal said the breakthrough marks an important first step, even as several details are still awaited.

“Finally is right. I think we have all been waiting for quite some time for this trade agreement,” Biswal said, stressing that the arrangement should be seen as a limited phase one pact rather than a comprehensive settlement.

India and the US announced the agreement on Monday, February 2, following months of negotiations. Under the deal, the reciprocal tariff rate on Indian exports will be reduced to 18%, down from the earlier 25% level, and from the 50% rate that was in place until now. US Ambassador to India Sergio Gor confirmed the overall tariff rate would be lowered to 18%.

Biswal said the agreement is expected to roll back the combined tariff burden that had weighed on trade flows. “I do believe that this will both remove the 25% energy tariffs, and the additional 25%, bringing it down to 18%,” she said, adding that further clarity will emerge once the full terms are released.

Trump, in a post on Truth Social, claimed India would reduce tariffs and non-tariff barriers on American goods to zero across several areas, while also committing to higher purchases of US energy and other products. However, Biswal cautioned that such claims need to be read carefully until the fine print is finalised.

“I imagine that there is a lot more to be learned about what the specific terms were that were agreed to by the two sides and what remains yet to be negotiated,” she said, noting that “nothing was final until everything is final” during the talks.

Biswal said the easing of tariff tensions is significant for both foreign portfolio and direct investors, who have been watching the negotiations closely. “The tariff overhang created a lot of uncertainty for both US businesses and Indian businesses,” she said. “This puts us on a much more stable and optimistic footing.”

She also linked the deal to India’s broader shift towards deeper economic engagement with Western partners, especially following what she described as a historic trade agreement between India and the European Union last week.

“Taken together, this stands to be transformative… and paves the way for much deeper strategic and economic alignment between our two countries,” Biswal said.

The Asia Group partner added that upcoming discussions on critical mineral supply chains, including External Affairs Minister S Jaishankar’s visit to Washington, signal growing convergence between India, the US and Europe on integrating economies and securing key industrial inputs.

“All of this… signals that there is growing convergence and a growing recognition that India, the United States, and Europe… have some fundamental convergence on ensuring that our economies are integrated and able to trade more efficiently,” she said.

Also Read | India-US trade deal announced; Tariff on exports drops to 18% from 50%

Below is the excerpt of the interview.

Q: This has been something that we've been waiting for a long time. President Trump now says that there is a deal with India. Tariffs go from 50% to 18%. He says that India has agreed not to buy any more Russian crude. There are many other claims as well. Prime Minister Modi also tweeted to President Trump. Nisha, what are your first reactions on this? Finally seeing a breakthrough?

Biswal: Well, finally is right. I think we have all been waiting for quite some time for this trade agreement. And let me emphasise, this is a phase one or interim agreement. There is much additional work to be done between our two countries, but this is really an important moment where I think the US and India have concluded this phase one agreement, according to what was announced by both the President and the Prime Minister. While we're still waiting for all the details to come out, I do believe that this will both remove the 25% energy tariffs, and the additional 25%, bringing it down to 18%. We're waiting to get some additional details on that. In return, India is bringing tariffs down to zero on a number of different fronts. Fundamentally, if you take the US-India deal along with the very historic deal last week between the EU and India, this stands to be transformative in terms of the impact on the Indian economy, on India's trade, and orientation towards Western economies like the US, EU, Canada, Australia, etc., and paves the way for much deeper strategic and economic alignment between our two countries.

Q: Just to go back to some of the details that President Trump has put forward, he says that India has agreed to zero tariffs. Now, we're still waiting for the Indian Government to give an official reaction on this front, but it cannot possibly be zero tariffs across the board. What do you think?

Biswal: I imagine that there is a lot more to be learned about what the specific terms were that were agreed to by the two sides and what remains yet to be negotiated. I know that in the negotiations there had been a number of areas where India had agreed to come down on tariffs. But of course, what we were hearing from both sides along the way was that nothing was final until everything is final. So, specifically, which areas India may be prepared to bring down to zero, and which areas have yet to be negotiated, are all details that we're waiting to find out.

Q: This was a clear overhang for investors, both foreign portfolio investors as well as foreign direct investors. This does clear the air, even as the fine print is being designed, does it not, Nisha?

Biswal: It does clear a lot of the tension that existed in the US-India economic relationship. I think the tariff overhang created a lot of uncertainty for both US businesses and Indian businesses. This puts us on a much more stable and optimistic footing. And I do believe that there is more to be done. Particularly, this happens also as Minister S Jaishankar is in Washington for a critical minerals conference that will discuss important mineral supply chains and how we can ensure that economies like India, the US, and other aligned nations have secure supplies of these critical minerals for their various industries. All of this, to me, signals that there is growing convergence and a growing recognition that India, the United States, and Europe, despite areas of divergence, have some fundamental convergence on ensuring that our economies are integrated and able to trade more efficiently.

Watch accompanying video for entire conversation.