India mulling lower duties for low-volume US imports

India could offer lower duties on select products that it doesn’t import in significant quantities from the US under the proposed Bilateral Trade Agreement (BTA), officials said. New Delhi has begun discussions with stakeholders in sectors such as auto and auto components where there is no significant threat to local industry from American imports.The commerce department has also started talks with line ministries to identify products where duty concessions could be offered without hurting domestic industry or interests. India would particularly look to shield its farm sector.

The government is also examining the impact of reciprocal tariffs proposed by the US administration on its trading partners. The idea is to look at India’s competitors in the export market to assess if there is any relative price benefit and work out a strategy. “We have begun talks with line ministries,” one official said. India exports auto components worth about $15 billion (`1.2 lakh crore) at nil duty to the US annually, officials said. The import of auto parts into India, however, attracts 5-15% duty. This was flagged during an inter-ministerial meeting to discuss the IndiaUS BTA. India and the US aim to more than double two-way trade to $500 billion by 2030 and negotiate the first part of a mutually beneficial, multi-sector BTA by the autumn of 2025.

New Delhi has already lowered duty on bourbon whisky to 100% from 150% besides announcing duty cuts on imports of fish hydrolysate for the manufacture of aquatic feed, specific waste and scrap items, ground installations for satellites, ethernet switches and motorcycles in the February 1 budget. This will benefit American exports. These measures assume significance as US President Donald Trump has termed India as a tariff abuser and threatened reciprocal levies.

It was also highlighted that there is negligible trade of ready-to-drive e vehicles with the US, so a duty relaxation in this segment may not significantly hurt domestic industry. “The US is a high-cost country and there is no sizable American manufacturer in India. If duties are lowered, it may not lead to imported products flooding the Indian market. The situation is evolving, and all aspects are being examined,” an official said.

If the US imposes a uniform tariff, Indian exports could face an additional levy of 4.9%, against the current 2.8%, think tank Global Trade Research Initiative (GTRI) said Friday. Indian farm exports would be hit hardest, with shrimp, dairy, and processed foods facing tariffs of up to 38.2%, it said. The gap between the US and India import duty is 8.6% for chemicals and pharmaceuticals, and 23.1% for automobiles and auto components. “The higher the tariff gap, the worse affected a sector will be,” said GTRI founder Ajay Srivastava.

It suggested the government propose a ‘zero-for-zero’ tariff strategy to the US to address Washington’s proposed reciprocal tariff hikes. Under this, India would identify product categories where it can eliminate duties for American imports without harming domestic industries and agriculture.