US trade deal could boost India's GDP by 0.6%
What's the story
A comprehensive trade agreement between India and the US could significantly enhance India's export and manufacturing capabilities, according to Bloomberg Economics. The study, conducted by economists Abhishek Gupta and Eleonora Mavroeidi, predicts that such a deal could increase India's GDP by as much as 0.6%. When services are included in the equation, total exports to the US are expected to rise by an impressive 64%.
Sectoral impact
Gains expected to be driven by textiles, light manufacturing
The potential gains from the India-US trade deal are expected to be majorly driven by sectors such as textiles and light manufacturing. This includes a range of products from toys and furniture to other consumer goods. The report highlights that this trade agreement could be a "turning point" for India's domestic manufacturing sector, further strengthening its position in the global market.
Negotiation pressure
July 9 deadline for trade deal negotiations
The urgency of the India-US trade deal negotiations is heightened by a July 9 deadline, after which higher tariffs could come into play. If no agreement is reached, India could be subjected to steeper duties. A trade deal with the US, even one with a 10% tariff, could make India an attractive alternative for global businesses looking to diversify their supply chains.
Economic consequences
India could lose one-third of direct exports to US
Bloomberg Economics has warned that if a trade pact isn't secured, India could lose over one-third of its direct exports to the US. This could also result in a 0.7% decline in GDP if reciprocal tariffs are raised to 26%. India was among the first countries to initiate trade talks with the US this year, with Prime Minister Narendra Modi making major concessions early on. However, negotiations have since become complicated over sensitive issues like agriculture.
Scernario
National interest is more important, not the deadline
India is not rushing to conclude any major trade agreement just to meet a deadline, but will proceed if the outcome benefits both sides, Union Commerce Minister Piyush Goyal has said. The Minister emphasized that India's stance in global trade talks remains consistent and rooted in principle. He also said that "India never enters into trade deals based on deadlines or time pressure. A deal is accepted only when it is fully matured, well-negotiated, and in the national interest."