India-US trade deal will be a game changer for investors: Arvind Panagariya

Open access to US and EU markets will make India a highly attractive destination for global investors, says Finance Commission Chairman Panagariya

The proposed trade agreement between India and the United States could be a major breakthrough for India’s investment climate, said Arvind Panagariya, chairman of the 16th Finance Commission. The deal, currently under negotiation, is expected to significantly liberalise India’s trade regime and enhance the country's attractiveness for global investors, he said.

 

“This will be a big shot in the arm,” Panagariya stated during an interaction hosted at the Consulate General of India in New York this week.  

“There’s plenty of promising activity taking place, but the India-US trade agreement stands out,” the noted economist said.  

 

Agreement with EU likely to follow US deal

Panagariya expressed optimism that the India-EU trade agreement would follow closely on the heels of the US deal. “Once the India-US trade deal happens, the one with the European Union will also fall into place conveniently,” he said. “These are the two largest markets. For any future investor, having open access to both will make India an extremely attractive destination.”

 

The economist emphasised that reduced trade friction with the US and the EU would be a game changer, significantly lowering barriers for foreign companies looking to invest in or trade with India.

Tariff cuts and liberalisation on the cards

Regarding tariffs, Panagariya noted that the agreement would likely involve India lowering some of its duties. “Potentially, a lot of good can come out of it. India will be reducing its tariffs as part of the process, which in itself is a tremendous opportunity,” he said. 

 

Panagariya said the most significant outcome of the trade deal would be domestic liberalisation. Improved access to the US market over competing nations would also be a major advantage.

Trump administration signals deal is close

US President Donald Trump has repeatedly stated that a trade agreement with India is imminent. As recently as last week, he remarked, “We’re very close to a deal with India, where they open it up.” He has reportedly set August 1 as a deadline for several countries, including India, to finalise trade agreements or face increased tariffs.

 

Commerce Minister Piyush Goyal recently also said that India is making “fantastic progress” in trade discussions with Washington. Negotiators from both countries are currently working to resolve outstanding issues, paving the way for the formalisation of the long-anticipated deal. 

Trade figures and future targets

According to the latest figures, total goods trade between the US and India stood at $129.2 billion in 2024. US goods exports to India reached $41.8 billion, marking a rise of 3.4 per cent ($1.4 billion) from 2023. Meanwhile, goods imports from India totalled $87.4 billion, up 4.5 per cent ($3.7 billion) from the previous year. The resulting trade deficit stood at $45.7 billion. 

India and the US have also announced a new ambition, dubbed ‘Mission 500,’ which aims to more than double the bilateral trade to $500 billion by 2030.  (With inputs from PTI, agencies)