The trade deal between India and the United States, signed on 5 February 2026, represents a transformative “trade expressway” and a cornerstone of India’s new economic strategy.
A Shift from Defensive to Offensive Strategy
- Shift to Offensive Trade Strategy: India has moved from a defensive trade stance to a more proactive approach in negotiating trade agreements.
- Expansion of Trade Architecture: The agreement adds to India’s broader trade framework, alongside recent deals with the EU, Australia, the UAE, and the European Free Trade Association.
- Rule-Setting, Not Symbolism: The deal establishes clear rules on customs duties and market access rather than being merely symbolic.
- Outcome of Sustained Diplomacy: The agreement reflects nearly a year of consistent negotiations and strategic diplomatic engagement.
Significant Tariff Reductions and Market Access
- Sharp Tariff Reduction: The deal lowers U.S. tariffs on Indian goods from 50% to 18%, significantly improving price competitiveness.
- Restoration of Export Competitiveness: Lower tariffs eliminate the cost disadvantage faced by Indian products, enabling them to compete more effectively with exports from Vietnam and Bangladesh.
- Boost to India’s Export Engine: As the U.S. accounts for nearly one-fifth of India’s total exports, the tariff cuts represent a major gain for export growth.
- Policy Certainty for Exporters: The agreement provides predictability in trade policy, allowing Indian exporters to undertake long-term investment and market strategies without fear of abrupt tax hikes.
Sector-Specific Benefits and “Landed Cost”
- Textiles: India can now compete effectively with countries that previously enjoyed lower tariff advantages.
- Gems and Jewellery: The price-sensitive diamond-polishing hub in Surat will see increased work as margins are no longer eroded by high taxes.
- Leather and Marine Products: The leather sector in Kanpur and Chennai, along with the shrimp and marine industries in Andhra Pradesh, will benefit from lower costs.
- Landed Cost: By reducing the tax component of the “landed cost” (product cost + shipping + tax), India gains a comparative advantage over competitors like China, Sri Lanka, and Pakistan.
- Competitive advantage means a country’s ability to produce and sell goods more efficiently or at a lower cost than competitors, enabling it to gain a stronger position in the market.
- Lower U.S. tariffs give Indian exports a price advantage over major competitors such as China, Bangladesh and ASEAN countries, strengthening India’s position in key global markets.
Strategic and Technological Alignment
- Boost to Make in India: The deal advances the Make in India vision by improving access to the U.S. market and strengthening India’s position as a global manufacturing hub.
- China Plus One Alignment: It supports the U.S. “China Plus One” strategy by positioning India as a key alternative destination for diversified global supply chains.
- Strengthening the iCET Framework: The agreement reinforces the Initiative on Critical and Emerging Technology, deepening collaboration across the defence, clean energy, and high-technology sectors.
- Catalyst for Innovation Ecosystem: Expanded trade is expected to attract U.S. R&D centres and joint ventures in India, enhancing domestic innovation and technology spillovers.
The Role of Indian Industry
- Policy Framework in Place: The government has created the enabling trade architecture—the “expressway” for market access and exports.
- Industry-Led Execution Imperative: The onus now shifts to the Indian industry to invest, expand capacity, and upgrade product quality to fully leverage the agreement and compete globally.
Conclusion
Overall, the India–U.S. trade deal enhances India’s export competitiveness, deepens strategic trust, and supports its long-term goal of becoming a global manufacturing hub
5 Feb 2026
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