India-US Bilateral Trade Agreement (BTA)

The India-US Bilateral Trade Agreement (BTA) is a trade deal that India and the United States are negotiating with each other. Its aim is simple: make it cheaper and easier for each country to sell goods and services to the other. It does this by cutting import taxes (tariffs), removing other trade hurdles and making supply chains stronger. It is being done in stages, called tranches, with an interim agreement as the first step.

Why does India need this deal?

The United States is India's biggest export market: India sells more goods to the US than to any other country. In 2024-25, total goods trade between the two was about $131.84 billion. India sold goods worth about $86.5 billion to the US and bought about $45.3 billion. So India had a trade surplus of about $41 billion (it sold much more than it bought).

The US was India's largest trading partner for the fourth year in a row. In 2025-26, goods trade grew to about $140.2 billion. India sold about $87.3 billion and bought about $52.9 billion. Imports from the US grew much faster than exports, so India's surplus fell to about $34.4 billion. In the same year, China overtook the US as India's largest trading partner overall (about $151.1 billion of trade).

But China buys far less from India, so the US is still where India sells the most. Because the US market is so large, any tax the US puts on Indian goods hits Indian jobs directly. This includes jobs in textiles, gems and jewellery, leather, shrimp and engineering goods. A trade deal gives exporters certainty: they know what tax they will pay for years ahead.

Why does the US want it?

The US has long complained that India's import tariffs are high, especially on farm goods, and that India has many non-tariff barriers (rules, licences and standards that make selling difficult even without a tax). The US also wants to reduce its trade deficit with India. A deal lets US farmers, factories and tech companies sell more in India, a market of over 140 crore people.

How did it start?

Trade has been a difficult area in India-US ties for years:

• In June 2019, the US ended India's benefits under the Generalised System of Preferences (GSP), a US scheme that let some goods from developing countries enter duty-free.
• In June 2023, both sides settled six pending disputes at the World Trade Organization (WTO) through a mutual agreement.
• On 13 February 2025, the leaders of both countries launched talks for the BTA. They also set a target called "Mission 500": to more than double two-way trade to $500 billion by 2030.
• The plan was to finish the first tranche by autumn (fall) 2025. That deadline slipped because of a tariff dispute (explained below).

The tariff storm of 2025

In April 2025, the US announced "reciprocal tariffs" on almost all countries. The idea was that the US would charge a country roughly what that country charged the US. From August 2025, Indian goods faced a 25% reciprocal tariff. From 27 August 2025, the US added another 25% penalty tariff linked to India's purchases of Russian oil. So many Indian goods faced a total extra tax of 50%, among the highest faced by any country. Labour-heavy sectors like textiles, shrimp and gems were hit hard.

The interim framework (February 2026)

On 6 February 2026, both countries announced a framework for an interim agreement:

• The US removed the extra 25% penalty tariff from 7 February 2026 and agreed to a reciprocal tariff of 18% on Indian goods such as textiles and apparel, leather and footwear, plastics, organic chemicals, home decor and handicrafts.
• The US agreed to remove tariffs on certain Indian aircraft and aircraft parts.
• India agreed to remove or reduce tariffs on all US industrial goods and on a wide range of US farm and food products, such as tree nuts (like almonds), fruits, soybean oil, wine and spirits, and animal feed items like dried distillers' grains (DDGs) and red sorghum.
• India kept its sensitive farm and dairy products protected. These include wheat, rice, maize, dairy, ethanol, tobacco and some vegetables. The framework has no provision for importing genetically modified (GM) farm products. Some fruits, such as apples, may come in only under a tariff-rate quota (a fixed amount allowed in at a lower tax; anything above it pays the full tax).
• India indicated it would buy about $500 billion of US goods over five years, including oil, gas, coking coal, aircraft, precious metals and technology products.
• Both sides agreed to deal with non-tariff barriers and barriers to digital trade (buying and selling of services and data online). They promised to work out clear digital trade rules as part of the full BTA.
• They also agreed to make supply chains stronger and to trade more technology products, such as GPUs (special computer chips used in data centres).
• Both sides said the interim deal is a step towards the full BTA.
• Rebalancing clause: The joint statement says that if either country changes the tariffs it agreed to, the other country may change its own commitments. This keeps the deal fair on both sides.
• Status: As of October 2026, the interim agreement had still not been signed. Indian officials said the deal was largely finalised, but its legal text was still being drafted. India said it would sign only after the US settled its new tariff system (explained below). The main open issues were how far India would open its farm and dairy markets, and what the final US tariff on Indian goods would be.

How did US court rulings change the picture?

The US President had imposed the reciprocal and penalty tariffs under a 1977 US law called the International Emergency Economic Powers Act (IEEPA). On 20 February 2026, the US Supreme Court ruled 6 to 3 that IEEPA does not allow the President to impose tariffs. The case is called Learning Resources, Inc. v. Trump. The Court said a tariff is a kind of tax, and the power to tax belongs to the US Congress, not the President. The US government then used other laws:

• Section 122 of the US Trade Act of 1974: allows a temporary import surcharge of up to 15% for a maximum of 150 days, unless the US Congress extends it. A general surcharge, starting at 10%, was imposed under it from 24 February 2026 and ended on 24 July 2026.
• Section 301 of the Trade Act of 1974: lets the US Trade Representative (USTR) act against trade practices it finds unfair. From 24 July 2026, the US applied a 10% Section 301 duty on goods from about 60 economies, including India.
• Section 232 of the Trade Expansion Act of 1962: lets the US put tariffs on imports it says threaten national security (used for steel, aluminium, cars and parts). These duties were not affected by the Supreme Court ruling.

This matters for the talks. The 18% rate in the interim framework was agreed when the IEEPA tariffs existed. Now the tariff base has changed, so India is asking for terms that still give its exporters an edge over rivals like Vietnam and Bangladesh.

How does a trade deal like this work?

Think of two shopkeepers in neighbouring towns. Each charges an "entry fee" on goods coming from the other town. In a trade deal, both agree to lower or remove the entry fee on a list of goods, one after another, over some years. Each side keeps a sensitive list of goods it wants to protect. In practice, the process has these parts:

1. Terms of reference: both sides agree what topics the talks will cover (goods, services, digital trade, standards, customs, and so on).
2. Negotiating rounds: officials from India's Department of Commerce and the Office of the US Trade Representative (USTR) meet many times.
3. Tariff offers: each side lists which tariffs it will cut, by how much and by when.
4. Rules of origin: rules that decide which goods count as "made in India" or "made in the US", so a third country cannot route its goods through one partner to get the low tax.
5. Signing and approval: in India, trade agreements are approved by the Union Cabinet. Parliament's approval is not legally required, because making treaties is an executive power of the Union.

India's red lines

India has kept some areas mostly protected in the talks:

• Agriculture and dairy: Over 40% of India's workers depend on farming, most with small plots. Cheap, subsidised US farm goods could hurt their incomes. Dairy is also sensitive for cultural reasons (for example, concerns about animal feed practices abroad).
• Genetically modified (GM) crops: India strictly regulates GM food crops.
• Data and digital rules: India wants the freedom to make its own rules on data storage and digital taxes.

India's position and other deals

The BTA is part of a larger push by India to sign trade deals with rich economies after it left the Regional Comprehensive Economic Partnership (RCEP) talks in November 2019. Recent deals include those with the UAE, Australia, the European Free Trade Association (EFTA), the United Kingdom, Oman, New Zealand and the European Union. The Commerce Ministry has said these deals will give India preferential access to markets covering around 75% of world GDP.

Commonly confused concepts

• Interim agreement vs full BTA: An interim agreement is a first, smaller deal that gives "early harvest" gains on some goods. The full BTA covers a much wider set of goods, services and rules.
• BTA vs Free Trade Agreement (FTA): "BTA" is a general name for any trade deal between two countries. An FTA is a specific type that removes tariffs on most trade. A BTA may be narrower than a full FTA.
• Bilateral Trade Agreement vs Bilateral Investment Treaty (BIT): A trade agreement is about buying and selling goods and services. A BIT is about protecting investments one country's companies make in the other.
• Reciprocal tariff vs penalty tariff: In 2025, the 25% reciprocal tariff was tied to trade balance. The extra 25% was a penalty linked to Russian oil purchases. They were separate taxes added together.

Issues, criticism and the way forward

• Farmer concerns: Farm groups worry that cheaper US imports (nuts, fruits, soybean oil, animal feed) could lower prices for Indian farmers. Supporters say many of these goods are not grown much in India or are already imported.
• Big purchase commitments: Critics question whether promising large purchases of US goods is realistic or good for India's energy and trade choices. Supporters say India needs these goods anyway (energy, aircraft, technology).
• Moving target: US tariff laws and rates changed several times during 2025-26. This makes it hard for India to know the value of what it is getting.
• Strategic autonomy: Linking tariffs to India's oil purchases from Russia raised concerns about pressure on India's independent foreign policy. This risk came back in September 2026. On 18 September 2026, the US President signed the Sanctioning Russia and Iran Act of 2026 into law. It provides for tariffs of up to 100% on all goods from the five largest buyers of Russian crude oil or gas. The President can waive these tariffs by telling the US Congress that a waiver is in the national interest. India is one of the biggest buyers of Russian crude oil, so this law adds pressure from outside the trade talks.
• Way forward: Experts suggest a deal that locks in stable, low tariffs for Indian labour-heavy goods, protects small farmers through sensitive lists and safeguards, and includes a clear system to settle disputes.

Concepts to Know

• Tariff: A tax a country charges on goods coming in from another country. It makes imported goods costlier.
• Trade surplus and trade deficit: A surplus means a country sells more to a partner than it buys from it. A deficit is the opposite.
• Market access: How easily a country's goods and services can enter and be sold in another country's market, given its taxes and rules.
• Non-tariff barrier: Any hurdle to trade other than a tax, such as strict quality standards, licences, quotas or long customs checks.
• Tranche: One part or stage of a larger deal.
• Generalised System of Preferences (GSP): A scheme where rich countries let some goods from developing countries in at low or zero tax, without asking for anything in return.
• Dried distillers' grains (DDGs): A protein-rich leftover from making ethanol from maize, used as animal feed.