India–US Trade Deal 2026: Key Features and Strategic Implications

India–US Trade Deal 2026 explained: tariff cuts, Russian oil shift, $500B procurement plan, sector winners, risks for agriculture, and strategic impact on India’s economy.

Table of Contents

Context

India and U.S agreed to a trade deal after months of negotiations, raising hopes for a strategic reset.

Key Feature of the Trade Deal

Key feature of the trade deal

Major Tariff Reductions

Indian Exports: The US slashed reciprocal tariffs on “Made in India” products from a punitive 50% down to 18%.
Withdrawal of Penalties: Washington dropped a specific 25% penalty tariff imposed in August 2025 over India’s continued purchase of Russian crude oil.
Indian Commitment: India pledged to progressively reduce its own tariffs and non-tariff barriers toward zero.

Protection of Sensitive Sectors

Agriculture and dairy sectors excluded from market-opening commitments.
Addresses concerns of Indian farmers and cooperatives.

Commitment to Lower Trade Barriers

Both sides agreed to progressively reduce tariff and non-tariff barriers.
Improves predictability for businesses and investors.

Strategic Energy Shift

Russian Oil Halt: India has reportedly agreed to cease imports of Russian oil.
Replacement Sourcing: To fill the gap, India will increase energy imports from the United States and potentially Venezuela.
Massive Procurement: Prime Minister Modi committed to purchasing more than $500 billion worth of US energy, technology, coal, and agricultural products

Key Beneficiary Sectors

Major Gainers

Textiles and Apparel: Largest export exposure to the U.S.; significant boost to MSMEs and employment.
Gems and Jewellery: Reduced tariffs improve competitiveness; possibility of zero-duty access for select items.
Pharmaceuticals: Incremental gains for generics and biosimilars; U.S. accounts for 30–40% of sector revenue.
Leather and Footwear: Labour-intensive sector expected to see immediate export revival.
Agriculture & Seafood: Indian rice, seafood (specifically shrimp), and various agricultural products gain improved access to the US market.
Technology & Manufacturing: The deal is seen as a catalyst for semiconductors, electronics, and AI-led technology.

Limited or No Relief

Steel and Aluminium: Section 232 tariffs (up to 50%) remain unchanged.
Agriculture: Market access concerns persist, despite official assurances of protection.

Key Concerns

Sectoral Imbalance: While tariff reduction benefits labour-intensive manufacturing exports, key sectors such as steel and aluminium continue to face high U.S. duties, limiting overall trade gains and creating asymmetric benefits.
Agriculture and Farmer Sensitivities: Despite official assurances that agriculture and dairy are excluded, fears persist over indirect market pressures from subsidised U.S. farm products, raising political and social concerns domestically.
Strategic Autonomy and Geopolitics: U.S. claims linking tariff concessions to India’s Russian oil imports have generated unease, as they touch upon India’s independent foreign policy and energy security considerations.
Transparency and Parliamentary Oversight: The absence of a publicly released final text and limited parliamentary discussion has raised questions about democratic accountability and long-term policy commitments.

Way Forward

Ensuring Transparency and Accountability: Placing the final trade agreement before Parliament and issuing detailed sector-wise impact assessments will strengthen trust, legitimacy and informed policymaking.
Safeguarding Vulnerable Sectors: Targeted domestic support, safeguard measures and productivity enhancement schemes are essential to protect farmers, MSMEs and sensitive industries from adverse spillovers.
Deepening Strategic Economic Cooperation: Beyond tariffs, India should leverage the deal to expand cooperation in critical minerals, semiconductors, defence manufacturing, clean energy and digital trade.
Balancing Trade Gains with Strategic Interests: India must continue diversifying trade partners, strengthening regional supply chains and maintaining policy autonomy to ensure economic integration does not compromise strategic independence.