India–USA Trade Potential After a Bilateral Trade Agreement (BTA)

Introduction

The prospect of a Bilateral Trade Agreement (BTA) between India and the United States has ignited fresh optimism across both business and policy circles. With ongoing negotiations and potential tariff cuts on the horizon, the deal could reshape the dynamics of trade between the two nations. But what exactly is the trade potential for India if a BTA materializes — and what are the risks and trade-offs?

Current Landscape: Why the BTA Matters Now

1. Tariff Pressure & Reciprocal Tariffs

   • The U.S. has imposed “reciprocal tariffs” on Indian goods, significantly raising duties. 

   • For example, electronics, automobiles, steel, and aluminum exports from India could be hit hard by these levies. 

   • The BTA is being negotiated in part to soften these blows and provide a more stable trade framework. 

2. Growing Bilateral Trade

   • The bilateral trade volume is already large: India–US trade hit USD 131.8 billion in FY 2024–25. 

   • According to trade-potential estimates, there is a huge “untapped” potential of around USD 85 billion for India’s exports to the U.S. in the near to medium term. 

3. Strategic Complementarity

   • India and the U.S. have complementary economies: India’s strength in labour-intensive manufacturing (textiles, jewelry, engineering goods) pairs well with the U.S.’s advanced technology, energy, and investment capacity.

   • A BTA would not just be about reducing tariffs — it could deepen supply chain integration, technology transfer, and investment.

Potential Export Opportunities for India

Here are some key sectors in India that stand to benefit significantly (or suffer less) if a BTA is finalized with favorable terms:

1. Textiles, Apparel & Gems

   • Labour-intensive sectors like textiles, apparel, and jewellery are among those highlighted in potential export-growth projections. 

   • These are also politically sensitive and employment-intensive, which makes them important for both economic and social outcomes.

2. Pharmaceuticals

   • Indian pharma has a strong global presence. Under current tariff scenarios, some pharma exports are more resilient because of exemptions or special treatment. 

   • A BTA could further lock in favorable conditions for Indian generic exports, helping maintain competitiveness.

3. Electronics & Engineering Goods

   • Engineering products are already a big part of Indian exports to the U.S.

   • With a BTA, electronics and other engineered goods could gain more scale, assuming tariff reductions make them more competitive.

4. Vehicles / Auto Components

   • Automobiles and auto parts are under pressure from high U.S. tariffs. 

   • If duties are negotiated down, Indian component makers and auto firms could tap into U.S. demand more effectively.

5. Agriculture & Specialty Goods

   • While India is negotiating carefully on agri-products (some are very politically sensitive), there is scope for processed foods, spices, and other niche exports. 

   • On the import side, India may offer tariff cuts on U.S. agricultural goods (like nuts) as a concession. http://www.papaexport.com

Challenges & Risks

A BTA is promising, but it’s not without significant challenges:

1. Trade Surplus Pressure

   • Analysts (e.g., CRISIL) expect India’s trade surplus with the U.S. to shrink under a trade deal because U.S. exports (especially in energy, agriculture, and defense) may become more competitive in India.

2. Tariff Uncertainty

   • Even with negotiations, some reciprocal tariffs are already in place or threatened. \

   • There’s a risk that not all sectors will get the desired tariff cuts — negotiation is complex, and some sensitive items may be excluded or reduced only partially.

3. Non-Tariff Barriers (NTBs)

   • Besides tariffs, there are non-tariff barriers like regulatory standards, technical norms, and customs procedures that could hamper trade growth if not properly addressed in the BTA. 

4. Political & Domestic Constraints

   • In India, cutting too many tariffs can be politically difficult, especially in sectors like agriculture. 

   • In the U.S., any trade deal needs to balance domestic political pressures, especially around jobs, manufacturing, and national security goods.

5. Macroeconomic Risk

   • According to some economic analysts, the imposition of tariffs (or uncertainty around them) could have macro risks: for instance, Goldman Sachs estimated that reciprocal U.S. tariffs could reduce India’s GDP growth in certain scenarios. 

   • Long-term gains depend heavily on whether this BTA leads to deeper, structural trade integration rather than just short-term tariff concessions.http://www.papaexport.com

Strategic & Long-Term Implications

1. Supply Chain Diversification

   • A stable BTA could encourage more U.S. companies to use India as a production base, helping India integrate into global value chains.

   • For India, this is a chance to attract higher-value manufacturing investments (beyond purely labour-intensive goods).

2. Geopolitical Gains

   • Strengthening economic ties with the U.S. aligns with India’s broader geopolitical strategy: balancing influence with major powers, deepening strategic partnerships, and ensuring economic resilience.

3. Export-Led Growth

   • If the BTA is leveraged well, India could boost its exports in key sectors and potentially unlock a large chunk of that USD 55 billion untapped export potential (per WTC Mumbai) to the U.S. 

4. Jobs & Innovation

   • More exports and higher value production could create jobs in manufacturing, services, and technology.

   • Technology transfer, as part of the BTA, could also spur innovation in Indian industry.http://www.papaexport.com

Conclusion & Way Forward

• The India–USA BTA represents a huge opportunity: for Indian exporters, for strategic investment, and for longer-term economic growth.

• But realizing this potential will require careful negotiation — not just on tariffs, but on non-tariff barriers, regulatory alignment, and supply-chain integration.

• Indian exporters, especially in textiles, engineering goods, pharma, and electronics, need to prepare: scale up capacity, improve quality, and engage proactively with policymakers.

• At the same time, Indian trade policymakers must guard national interests: ensure that tariff cuts do not unduly harm sensitive sectors, and that the benefits of the BTA are broad-based (not just concentrated in a few industries).

• If struck wisely, a BTA could catalyze a win-win: greater U.S. access to Indian goods, deeper economic ties, and a stronger, more resilient export ecosystem in India.http://www.papaexport.com