India-US trade deal: Which sectors will benefit most from tariff cuts?

The trade framework opens opportunities for Indian exporters, safeguards sensitive sectors, and sets the stage for broader cooperation in technology, digital trade, and supply chains

India and the United States on Saturday announced they have agreed on an interim trade framework aimed at enhancing bilateral trade toward a $500 billion target over five years. The agreement provides reciprocal market access, tariff relief on select products, and safeguards sensitive sectors, while paving the way for a broader Bilateral Trade Agreement (BTA) covering technology, digital trade, and supply chains.

 

Here is a list of India’s sectoral gains under the interim trade framework:

 

Pharmaceuticals

 

India’s generic drugs and pharmaceutical ingredients will gain improved access to the US market. Subject to US review under Section 232, negotiated outcomes will secure continued market presence for Indian drug makers, who account for a significant share of generic medicines in the US.

 

According to data from the India Brand Equity Foundation, a trust set up by the Department of Commerce to promote the 'Made in India' label overseas markets, India exports $9.78 billion worth of pharmaceuticals annually to the US. Tariff reductions could increase competitiveness and expand market share.

 

Gems and diamonds

 

The US will reduce tariffs on Indian gems and precious stones, allowing exporters to benefit from preferential treatment.

 

India’s gem and jewellery sector, which contributes around $9.97 billion in exports to the US, stands to gain from easier market access and improved margins.

 

Aircraft and aircraft parts

 

Certain tariffs on aircraft and components imposed for national security reasons will be removed, opening up the US market for Indian aerospace manufacturers.

 

Indian exporters of aircraft parts, aluminium, steel, and copper components for aviation may gain a competitive edge in the US market compared with non-preferred suppliers.

 

Technology and digital trade

 

The agreement also encourages expanded trade in technology products such as graphics processing units and data centre goods, along with cooperation on investment reviews and supply chain resilience.

 

This could support India’s growing IT hardware sector and strengthen digital trade rules, making exports more predictable and competitive.

 

Automotive components

 

India will receive preferential tariff rate quotas for automotive parts previously subject to US national security tariffs. This will benefit auto component makers looking to expand their US footprint.

 

Scope for further tariff cuts

 

Under the interim trade framework, both India and the US have signalled openness to deeper tariff reductions as negotiations progress toward a full Bilateral Trade Agreement (BTA). While the interim framework initially sets a reciprocal tariff rate of about 18 per cent on most Indian exports to the US, it also explicitly provides scope for additional tariff cuts on key sectors if the comprehensive deal is concluded successfully.

 

Preferential market access and rules of origin

 

India and the US will also commit to preferential market access in sectors of mutual interest, with rules of origin ensuring benefits accrue to both sides. Standards and compliance procedures will also be eased to simplify exports.

 

Meanwhile, stable and predictable trade conditions are expected in the near term, with the scope for further tariff reductions once the full BTA is finalised. The interim framework is intended as a stepping stone toward a comprehensive BTA planned that will likely conclude over the coming months.