India, US to sign first phase of trade pact by mid-March, says minister

India and the United States are likely to sign the first tranche of the much-awaited bilateral trade agreement by mid-March, a move that would see Washington sharply lower import duties on Indian goods, Commerce and Industry Minister Piyush Goyal said on Thursday.

Goyal said the two countries are expected to finalise and sign a joint statement on the first tranche of the agreement within the next four to five days. Following this, US tariffs on Indian exports will be reduced to 18 per cent from the current 50 per cent.

The agreement, finalised earlier this week, provides for a cut in duties on Indian goods entering the US, which currently attract a 50 per cent levy- comprising a 25 per cent reciprocal tariff and an additional 25 per cent duty linked to India's purchase of Russian crude oil.

"The first tranche of the bilateral trade agreement is almost ready. We expect that in the next four to five days, we will finalise and sign a joint statement between India and the US, and based on that, the first phase of this partnership will begin," Goyal told reporters.

He added that a formal agreement is currently being drafted and could take a month to six weeks to complete, making mid-March a likely timeline for its signing.

Once the joint statement is signed, the reduced 18 per cent tariff on Indian goods will be implemented through an executive order by the US, expected to be issued within a day or two. Goyal also clarified that the pact does not include any investment commitments.

Commerce Secretary Rajesh Agrawal said that the legal agreement will give us the authority to reduce tariffs on American goods. "Indian tariff reductions (will happen) only after a legal agreement," Agrawal said, adding Indian tariffs are MFN (most favoured nation) levies, and American import duties are executive tariffs.

About the $500 billion purchase part of the deal, Goyal said that with the fast-paced growth at which India is going ahead, the country will need large volumes of energy, data centre equipment, and ICT products.

"Our steel capacity is going to double from today's 140 million tonnes to about 300 million tonnes in the next few years. And therefore, when we estimated what we will need from the USA, we came to a figure of at least 500 billion dollars. We can clearly see before our eyes the potential that we can procure from the US over the next five years," Goyal said.

India's aircraft demand alone, he said, "orders placed on Boeing and yet to be placed but ready, are nearly 70-80 billion dollars. If you add the engines and other spare parts, it will probably cost 100 billion dollars," he said, adding that for data centres, huge concessions have been announced in the Budget.

The minister further said that to meet the $500 billion bilateral trade target between the two countries, set out in February 2025, India will certainly need to do a lot more exports and a lot more sourcing between the USA and India.

The signing of the joint statement will happen virtually.