India offers quota-based auto duty cuts, tariff reduction on alcohol under US trade pact

India will grant quota-based duty concessions in the automobile sector, while access to alcoholic beverages has been offered under tariff reduction and minimum import price-based formulations under the trade pact with the US, the government said on Monday.

It also said that under the agreement, tariffs on USD 30.94 billion of India’s exports will be reduced from 50% to 18%, while the reciprocal tariffs on another USD 10.03 billion will be eliminated.

"This means a substantial share of Indian goods entering the US market will now face either sharply lower tariffs or completely duty-free access, significantly improving price competitiveness,” the government said.

It said that USD 1.36 billion of Indian agricultural exports receive zero additional US duty access. Key products include spices, tea, coffee, fruits, nuts and processed foods.

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It said that sensitive sectors such as automobiles have been liberalised through a combination of quota and duty reduction mechanisms.

According to an official, India is not granting any duty concessions on electric vehicles to the US.

Medical devices have been addressed through long and staggered phasing schedules, and precious metals and other sensitive industrial products have been managed through quota-based tariff lowering.

”Alcoholic beverages have been offered under tariff reduction along with minimum import price-based formulations, consistent with India’s approach in other FTAs (free trade agreements),” it added.

Listing out sectoral gains for India, it said Tariffs on textile exports will be cut down from 50% to 18%, while silk receives nil duty access, opening enhanced opportunities in the US market valued at USD 113 billion.

Similarly, tariffs will be reduced to 18% for the domestic gems and jewellery sector, providing preferential access to the American market valued at USD 61 billion.

”In addition, 0% duty market access has been secured for major product categories including diamonds, platinum and coins, covering a US market of USD 29 billion,” it said adding.

Key export categories expected to benefit include cut and polished diamonds, lab-grown synthetic diamonds, coloured gemstones, synthetic stones and articles of gold, silver, and platinum.

It said India maintains a trade surplus of USD 1.3 billion in agricultural trade with the United States, with exports of USD 3.4 billion and imports of USD 2.1 billion in 2024.

The United States will apply zero additional duty on Indian exports worth USD 1.36 billion.

Beneficiary products include spices; tea and coffee; copra and coconut oil; nuts such as cashew nuts and chestnuts; fruits including avocados, bananas, guavas, mangoes, kiwis, papayas, pineapples, and mushroom.

Cereals such as barley and canary seeds; bakery products; cocoa, and cocoa preparations; sesame and poppy seeds; and processed products such as fruit pulp, juices and jams will also be benefitted.

In line with India’s approach in previous trade agreements, agricultural market access has been structured based on product sensitivity.

The offer is categorised into immediate duty elimination, phased elimination (up to 10 years), tariff reduction, margin of preference and tariff rate quota mechanisms.

It said highly sensitive agricultural sectors remain fully protected under a carefully crafted exemption category. These broadly include meat, poultry and dairy products; GM food products; soyameal; maize; and cereals.

For select sensitive agricultural products, the tariff reduction category has been applied to ensure that a measured level of duty protection continues.

Examples include parts of plants, olives, pyrethrum and oil cakes.

Certain highly sensitive items have been liberalised under Tariff Rate Quotas (TRQs), where limited quantities are allowed at reduced duties.

Products under this category include in-shell almonds, walnuts, pistachios, and lentils, it said.

It added that phased elimination of tariffs over up to ten years has been adopted for certain intermediate products used by India’s food processing industry and sourced from multiple countries.

These include albumins, certain oils such as coconut oil, castor oil and cotton seed oil, and plants and parts of plants.

”Immediate duty elimination has been offered only for select non-sensitive products that are already liberalised under other FTAs,” it said.

The agreement secures zero additional duty access for industrial exports valued at USD 38 billion, the government said.

India will face zero-reciprocal duty in major industrial product categories, including gems and diamonds, platinum and coins, clocks and watches, essential oils, inorganic chemicals, articles of paper, plastics and wood, and natural rubber.

On the other hand, market access for American industrial goods has been structured strictly on the basis of product sensitivity, combining immediate tariff elimination, phased reduction (up to ten years) and quota-based access.

In 2024, India’s digitally-delivered services exports stood at USD 0.28 trillion, growing at 10.3% year-on-year.

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India ranks 5th in exports of global digitally-delivered services and 11th in imports.

While the United States holds the first rank in both exports and imports.

”A structured digital trade framework between the two countries reduces regulatory uncertainty, lowers compliance friction and facilitates smoother cross-border service delivery,” it said.