India looks to fast-track trade deal with US; open to zero duty on imports from US in PLI, others sectors
India is willing to consider duty-free imports from the United States across various sectors, including those under production-linked incentive (PLI) schemes, according to sources familiar with the matter. A substantial offer from India could hasten the proposed bilateral trade agreement (BTA), aiding in the removal of the 26% reciprocal tariff imposed on India since April 9.
The Production Linked Incentive (PLI) programme presently encompasses 14 different industries with a budget allocation of Rs 1.97 lakh crore, including sectors such as mobile phones, drones, white goods, telecom, textiles, automobiles, specialty steel and pharmaceuticals.
The duty-free access would require compliance with strict rules of origin, necessitating 30-40% value addition and tariff heading modifications as essential criteria.
Looking for middle ground
“Inter-ministerial consultations are on what can be offered under the bilateral trade agreement with the US —all options are open,” a person familiar with the discussions, told ET, adding that zero-for-zero tariffs will be beneficial for these sectors.
The robust origin requirements would block third-country products from entering India through the US at reduced or zero duties.
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Government departments are seeking industry input regarding tariff reductions in their sectors. Various industry associations and export organisations have urged the government to accelerate BTA negotiations, with the initial phase scheduled for completion within six months.
India is eager to progress with the BTA, aiming for completion by fall 2025. The agreement was discussed during Prime Minister Narendra Modi’s meeting with US President Donald Trump in February.
The bilateral trade target between the two nations aims to reach $500 billion by 2030, more than doubling the current figures.
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Government representatives indicated that numerous domestic producers in these sectors can sustain operations without import duties. They suggested that duty benefits could be extended to products where India holds a labour cost advantage.
“The Indian industry for most sectors is robust enough, specially post-manufacturing incentives like PLI, and should be amenable to lower tariffs, making the current scenario an opportunity to become competitive in the global value chains,” said Bipin Sapra, tax partner, EY India. “Offering zero for zero tariffs would allow India to capture the US market in sectors it has been pushing to increase its exports and will in turn boost Make in India.”
A source indicated that US authorities are particular about strict value addition requirements to prevent goods from third countries entering through India. Certain sectors might require consideration for enhanced value addition levels.
The majority of trade agreements, including free trade arrangements signed by New Delhi, require approximately 35% value addition with a four-digit level tariff heading modification, ensuring significant transformation.
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