India-US Trade Pact: First Tranche for Goods, Services Later, as Talks Continue
India's Commerce Secretary said the talks on the India-US Bilateral Trade Agreement (BTA) are "on the right track", and both negotiating teams are still meeting, mostly online.
The deal is being built in stages, called tranches. The first tranche will cover only goods (physical products like garments, shrimp and machine parts). Services (like IT, finance and professional work) will come in the second tranche.
The United States has promised India a tariff advantage: Indian goods should face a lower US import tax than goods from rival exporting countries. But the final framework, with exact tariff numbers, has not yet been settled.
A US team visited India in early November 2026 for talks on customs and trade facilitation (making goods clear the border faster). The full talks cover 16 policy areas, including market access for goods and services, rules of origin and trade remedies.
India is also waiting for the result of US investigations under Section 301 into "excess capacity", which could lead to new US tariffs. Another round of talks is planned for December 2026.
India-US Bilateral Trade Agreement (BTA)
The India-US Bilateral Trade Agreement is the trade deal India and the United States have been negotiating since February 2025. Its aim is to cut import taxes (tariffs) and other trade hurdles so that each country can sell more to the other. It is being done in stages: an interim framework first, then tranches, and finally a full agreement. The US is India's biggest export market, so the deal matters a lot for Indian jobs in textiles, gems, leather, shrimp and engineering goods.
The Commerce Secretary's update shows the BTA moving in the planned stages. The first tranche is limited to goods and is waiting for the final US tariff structure, while services will be negotiated in the second tranche. The US promise of a tariff edge meets India's main condition for putting the first tranche 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, while each keeps its own tariffs for outsiders. Countries often do not sign everything at once. They first sign a smaller interim or "early harvest" deal on a list of goods where agreement is easy, and then keep negotiating the rest, such as services, investment and digital trade. The tranche approach in the India-US talks is an example of this step-by-step method.
By keeping the first tranche to goods and pushing services to a second tranche, India and the US are following the familiar interim-then-full path used in many FTAs. The goods tranche gives exporters quick tariff relief, while harder subjects need more time.
GATS and the Four Modes of Trade in Services
The General Agreement on Trade in Services (GATS) is the World Trade Organization's rulebook for trade in services, such as software, banking, education, tourism and health care. It says a service can cross a border in four ways, called modes. Countries use these four modes when they write the services chapter of any trade deal, so they will shape the second tranche of the India-US deal.
Services are left for the second tranche of the India-US deal. When those talks begin, India is expected to push for easier movement of professionals (Mode 4) and smooth cross-border digital services (Mode 1), since the US is a major buyer of Indian IT and business services.
- First tranche of India-US BTA: goods only; second tranche: services
- Talks cover 16 policy areas; another round planned for December 2026
- India-US BTA talks launched: 13 February 2025; target: $500 billion trade by 2030 ("Mission 500")
- Interim framework: 6 February 2026; US reciprocal tariff on many Indian goods set at 18%
- US Supreme Court ruling against IEEPA tariffs: 20 February 2026 (Learning Resources, Inc. v. Trump, 6-3)
- India-US goods trade 2025-26: about $140.2 billion (exports about $87.3 billion, imports about $52.9 billion)
- FTAs under GATT Article XXIV; services deals under GATS Article V
- GATS four modes: cross-border supply, consumption abroad, commercial presence, presence of natural persons