India and the US are set to hold crucial trade talks scheduled around August 25, 2025 amid tariff tensions linked to the Russian oil trade.

About the US–India Trade Talks

• Aim: To resolve tariff disputes and explore trade concessions across multiple sectors.
• The government has sought industry suggestions to make the deal more attractive for the US while protecting domestic interests.

Focus Area: Duty-Free Access for Cotton and Agricultural Product

Duty-Free US Cotton Imports: 

• The government is considering allowing duty-free imports of US cotton to address declining domestic cotton production.
  • This could help the textile and apparel industry lower raw material costs and enhance global competitiveness.
  • Bangladesh has previously offered similar concessions to the US in its own trade agreements.
• Agricultural Items Under Limited Quotas: India is exploring quotas for certain American agricultural items but excluding genetically modified (GM) food crops.
  • Only Bt cotton is currently approved for cultivation in India; no GM food crop is commercially grown.

Potential Benefits

• Boost to Textile Exports: Duty-free access to US cotton can enhance production efficiency and strengthen India’s $37.8 billion textile export sector, which sends nearly 30% of its apparel to the US.
• Cost Competitiveness in Manufacturing: Lower raw material costs from duty-free cotton imports can help Indian manufacturers maintain production volumes despite domestic cotton shortages.
• Expansion of Export Incentives: Broadening the Remission of Duties and Taxes on Exported Products (RoDTEP) and extending the Interest Subvention Scheme to more MSMEs can offset tariff-related costs for labour-intensive sectors.
• Diversification of Beneficiary Sectors: Besides textiles, sectors like footwear, gems, and jewellery could also benefit from reduced input costs and improved global competitiveness.
• Strategic Trade Positioning: A favourable deal supports ‘Make in India’ goals and strengthens India’s role in the China+1 supply chain diversification strategy.

Challenges to the Trade Agreement

• Rising Tariff Pressures: The US has imposed 25% tariffs on certain Indian imports, with the possibility of escalation to 50% in some categories.
• Intense Global Competition: India faces strong competition from China, Bangladesh, and Vietnam, particularly in low-margin textile and footwear sectors.
• Export Order Delays: Many exporters have paused order confirmations until the trade negotiations conclude, creating uncertainty in business operations.
• Sectoral Vulnerability: The gems and jewellery industry risks losing competitiveness in the US market if tariffs remain high and rough diamond imports face restrictions.
• Sentiment Barriers: Recent tensions over the Russian oil trade have hardened public sentiment against making major concessions in a trade deal.

Conclusion

A balanced US–India trade deal could ease tariff tensions, boost key export sectors, and reinforce strategic supply chain positioning, but success hinges on safeguarding domestic interests amid geopolitical sensitivities and rising global competition.

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