India-US Trade Deal Near Final Stage: Why It May Leave Out Difficult Sectors
The US President said the US was "pretty close" to a trade deal with India, but that it would be a different kind of deal from the ones the US has signed with others. The US Secretary of State also said both sides were very close to an agreement.
India's Ministry of Commerce and Industry had said a week earlier that the deal was almost final and only legal vetting (checking of the legal text) remained. It will be put into effect once India is clear about its competitive advantage over other exporting countries.
The deal may not cover every sector. The two sides may agree on areas where they have settled their differences and leave out sectors that remain disputed.
India is open to some US demands, such as on certain technology products and on buying US gas (Indian oil companies signed gas import agreements last year), if this secures easier US market access for Indian textiles, footwear and engineering goods.
Indian exports to the US currently face an extra 10% tariff under Section 301 of the US Trade Act, 1974, imposed after a US investigation into alleged weak action against goods made with forced labour. Extra tariffs of 10% to 12.5% apply to more than 50 countries. A second Section 301 probe, on "structural overcapacity", is still pending.
Indian officials expect more clarity after the US mid-term elections in the first week of November.
India-US Bilateral Trade Agreement (BTA)
The India-US Bilateral Trade Agreement is a trade deal that India and the United States are negotiating to make it easier to sell goods and services to each other. It aims to cut import taxes (tariffs), remove other trade barriers and strengthen supply chains. It is being negotiated in stages, called tranches, with an interim agreement as the first step. The US is India's largest export market, so the terms of this deal matter greatly for Indian jobs in export industries.
Leaving disputed sectors out lets both countries sign a deal on the areas they already agree on, rather than wait for agreement on everything. For India, the real test is whether the deal gives its labour-heavy exports like textiles and footwear a lower tariff than competing countries.
Section 301 of the US Trade Act, 1974
Section 301 is a part of the United States' Trade Act of 1974. It allows the US Trade Representative (USTR) to investigate whether another country's trade practices are unfair to US businesses, and then to respond with tariffs or other restrictions. Unlike emergency powers, it requires a formal investigation, with public comments and hearings, before action is taken. After a 2026 US Supreme Court ruling limited the President's emergency tariff powers, Section 301 became one of the main legal tools for US tariffs.
India's advantage under the deal depends on how its Section 301 tariff compares with those on rival exporters like Vietnam or Bangladesh. This is why Indian officials are waiting for clarity on the pending overcapacity probe before putting the deal into effect.
Free Trade Agreements: Concept and WTO Framework
A Free Trade Agreement (FTA) is a deal between two or more countries to remove or sharply cut tariffs on most of the goods they trade with each other. Under World Trade Organization rules, members must normally treat all other members equally (the Most Favoured Nation or MFN rule). FTAs are an allowed exception, but only if they cover "substantially all the trade" between the partners, under Article XXIV of GATT (for goods).
A deal that deliberately leaves out difficult sectors is "different" from a classic FTA, which must cover almost all trade. This is why the proposed India-US pact is described as a limited, staged agreement rather than a full free trade agreement.
- US position: deal "pretty close", but "a different kind of deal" from other US trade agreements
- India's position: deal almost finalised; only legal vetting pending; implementation linked to clarity on India's competitive tariff advantage
- Current extra US tariff on Indian goods: 10% under Section 301 (forced-labour probe); 10%–12.5% on over 50 countries
- Pending: second Section 301 probe on structural overcapacity
- August 2025: US tariff on Indian goods reached 50% (including a 25% Russian-oil penalty, later withdrawn)
- Sectors India seeks better access for: textiles, footwear, engineering goods
- US mid-term elections: first week of November 2026
- WTO rule for FTAs: Article XXIV of GATT ("substantially all the trade")