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India-US Trade Deal: Tariffs Slashed, GDP Boosted
9 Feb
Summary
- India's US farm imports may see tariffs reduced to zero.
- Goldman Sachs forecasts India's 2026 GDP growth to rise.
- Key sectors like gems and textiles to benefit significantly.
An interim trade agreement between India and the United States, slated to take effect by mid-March, promises to reshape trade dynamics. Goldman Sachs anticipates that approximately 60-70% of India's agricultural imports from the US could face reduced or zero tariffs. Reflecting optimism about this pact, Goldman Sachs has revised its forecast for India's real GDP growth in calendar year 2026 upwards by 20 basis points to 6.9% year-on-year.
The agreement also includes provisions for the US to eliminate punitive tariffs on India for its oil purchases from Russia and to lower reciprocal tariffs. Barclays reports that this tariff reduction to 18% from 25% is expected to enhance India's trade competitiveness relative to its key trading partners. Furthermore, the gems and jewellery, textiles, and footwear industries are projected to be major beneficiaries, with effective tariff rates on Indian exports to the US potentially dropping from 35.7% to 16.3%.
