India, US to slash tariffs via 'mutually beneficial' trade agreement
What's the story
India and the US have agreed on a 'mutually beneficial' trade agreement. The pact will see both countries slashing tariffs, a senior government official revealed to Moneycontrol.
The agreement was reached during a meeting between Prime Minister Narendra Modi and US President Donald Trump.
Both leaders have set an ambitious target to increase their bilateral trade volume to $500 billion by 2030.
Trade specifics
No free trade agreement yet
The official clarified that while consensus has been reached, a free trade agreement is not yet in place. Further discussions are needed to outline specifics of this trade deal. "This step is basically seeing tariffs on US products versus products they import," said the source.
Agreement evolution
Shift from mini to bilateral trade deal
The source also revealed that earlier talks between India and US were centered on a mini trade deal on the Most-favored Nation (MFN) principle.
But this time, both sides are calling it a bilateral trade deal and not a mini one.
The source stressed that this new deal is more equitable and is something both countries plan to take forward.
Possibility
Will trade deficit be a factor?
When asked whether the bilateral trade deal will be used to counter impact of US's reciprocal tariffs, the official said, "The Bilateral Trade deal has nothing to do with US's reciprocal tariffs."
The tariffs will hurt most economies that have high deficits with America.
However, the official said, "India is much lower in hierarchy when it comes to US's trade deficit with India. They are more focussed on nations with whom they have much larger trade deficits such as China."