‘India-US trade breakthrough unlikely soon; narrow interim deal possible’ | Economy & Policy News

India and the US are unlikely to see a breakthrough in trade deal negotiations in the near term, as the two sides remain divided over market access, agriculture, purchases of US goods and India’s imports of Russian oil, according to BMI, a Fitch Solutions company. However, the agency said they may eventually conclude only a narrow interim trade deal.

 

“We expect India and the US eventually to conclude a narrow interim trade deal, although the remaining differences make a near-term breakthrough unlikely,” the agency said in its report on the outlook for the India-US interim trade agreement.

 

India and the US began negotiations for a bilateral trade agreement (BTA) in March last year with the aim of concluding an interim deal by the autumn of 2025. More than a year past that targeted timeline, with the autumn of 2026 underway, talks are still ongoing.

  

BMI expects negotiations to continue towards the December 14–15 G20 summit in Miami, which could serve as the next political anchor, although it considers an agreement by then unlikely.

 

Both nations had reached an agreement in February and issued a joint statement, in which the US committed to cut reciprocal tariffs on India to 18 per cent from 25 per cent, while India committed to ramping up energy purchases from the US. However, soon after, the Supreme Court of the United States scrapped the legal basis for the reciprocal tariff.

 

Since then, New Delhi and Washington have again engaged in negotiations to finalise updated terms of the deal. India has also sought a mechanism to ensure it gets a tariff edge in the US over other competing economies under the trade deal.

 

While India and the US have narrowed their differences, the remaining issues will prove the hardest to resolve, the BMI report said.

 

Earlier this week, Finance Minister Nirmala Sitharaman said that the two partners have reached a plateau in the negotiations, beyond which giving any further concession was difficult for either side. Last week, US Trade Representative Jamieson Greer also said that negotiators had identified the full set of sticking points, but an agreement was not imminent.

 

Following the comments from the two leaders, there have been concerns that Washington has again sought access to the farm sector under the deal — a demand that had brought talks to a stalemate during July–August last year. New Delhi has not opened access to the politically and socially sensitive farm sector under any trade agreement.

 

“India wants meaningful preferential access, while Washington seeks agricultural concessions, larger US purchases and a smaller bilateral trade deficit,” the BMI report said. The remaining differences are likely to be the hardest to resolve, BMI added.

 

The US had a trade deficit of around $34 billion with India in 2025–26 (FY26).

 

India is unlikely to offer costly concessions unless Washington provides it with a clear advantage over competing exporters. India’s effective tariff rate on US imports currently stands at 13.6 per cent, according to BMI’s Operational Risk team, significantly below the roughly 35 per cent starting point used in February. This means a narrow deal would deliver only modest direct gains unless it covers commercially important sectors, the report said.

 

India’s continued reliance on Russian crude oil has also been an obstacle to the negotiations. The February framework appeared to link tariff relief with reduced Russian oil purchases. However, supply disruptions following the West Asia conflict have increased India’s incentive to retain alternative oil sources.

 

Russia accounted for half of India’s crude import volumes in July 2026, the BMI report mentioned.

 

US President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act last month, which authorises him to impose a duty of up to 100 per cent on economies that purchase energy products from Russia.

 

Additionally, the Office of the USTR has also initiated two investigations against India under Section 301 of the US Trade Act of 1974 and has imposed a 10 per cent additional duty on Indian goods after concluding one of the investigations alleging the presence of forced labour in supply chains. The other probe, alleging excess structural capacity, remains underway.

 

A narrow agreement could allow both sides to defer their most contentious issues. “India could lower tariffs on selected US agricultural and industrial products and commit to larger purchases, while Washington could provide preferential treatment to selected Indian exports and leave issues such as dairy, genetically modified products and some regulatory barriers for later negotiations,” the report said.

 

Trump’s action in relation to the Russia sanctions law in the next 30 days is likely to be a near-term trigger for the talks, the BMI report said.

 

The agreement would only reduce policy uncertainty and support selected Indian exporters, but its direct effect on growth is likely to be modest, BMI said.