India Secures Concessional Duty Access for Garments in US Trade Agreement
India is set to receive concessional duty access for garments manufactured using American yarn and cotton under the proposed trade agreement with the United States. Commerce and Industry Minister Piyush Goyal announced this development on Thursday, highlighting that the benefits will mirror those currently available to Bangladesh.
Details of the Duty Concessions
The United States has reduced reciprocal tariffs on Bangladeshi goods to 19%, with garments attracting zero duty only if they are produced using US cotton and man-made fibres. Currently, a Bangladeshi garment faces a 31% levy, comprising a 12% most-favoured nation duty plus the 19% reciprocal tariff. However, if US fibres are utilized, the duty drops to 12%.
"Whatever Bangladesh has got, India will also get the same in the final agreement," Goyal stated to reporters. He confirmed that this provision will be included in the fine print of the India-US pact.
How the Provision Works
The minister explained that if Indian companies procure yarn forward and cotton forward from the US, manufacture garments, and export them to the US, those products would qualify for duty-free access, similar to Bangladeshi firms. This arrangement is based on rules of origin (RoO) in trade agreements, which require specific production stages within the free trade area to qualify for duty concessions.
"That provision exists in the US-Bangladesh agreement, and it will be in our agreement also," Goyal emphasized, adding that the arrangement will not adversely impact Indian cotton farmers. He noted that the US has limited cotton production, exporting about $5 million worth, while India is targeting $50 billion in exports.
Timeline and Implementation
The benefit for India’s apparel sector will come into effect after India and the US sign the legal agreement for the interim trade deal, which is expected by mid-March. The two nations have already finalized a framework for the first phase of the bilateral trade agreement, likely to be implemented in March.
Goyal assured that there will be no quota on the import of raw materials such as cotton, and he highlighted that US businesses are increasingly viewing India as a trusted partner.
Agricultural Products Excluded
Addressing concerns about agricultural concessions, Goyal clarified that most products grown by Indian farmers are outside the scope of the trade deal. This includes dairy, cereals, poultry, soyameal, maize, most fruits and vegetables, ethanol, tobacco, many pulses, and millets.
"Around more than 90-95 per cent of the products grown by farmers are out of the US trade deal," Goyal said, responding to opposition allegations that India has conceded a large part of its agricultural market. He explained that only items that India currently imports and will not hurt farmers have been opened in a calibrated manner after careful consideration.
Political Context and Response
The minister’s remarks come after Leader of Opposition Rahul Gandhi alleged that the interim India-US trade deal was a "wholesale surrender," claiming that India’s energy security and farmers’ interests had been compromised. Goyal countered by stating that the Congress leader should apologize to the people of India for such claims.
Additional Benefits for Medical Devices
Separately, at a Medtech, innovation, and startup event, Goyal mentioned that India’s free trade agreements would provide significant concessional-duty market access to the domestic medical devices sector. In certain FTAs, Indian medical devices will receive duty concessions.
"We are opening developed markets through the nine FTAs, which cover 38 countries with rich people and high per capita incomes," the minister said. He suggested exploring land in states such as Rajasthan and Uttar Pradesh for developing a medtech zone similar to the Andhra Pradesh MedTech Zone (AMTZ).
Goyal added that the National Industrial Corridor Development Corporation (NICDC) could consider reserving 50-100 acres of land for medical device manufacturing units.
Industry Reaction
Commenting on the US-Bangladesh arrangement, Apparel Export Promotion Council (AEPC) Chairman A Sakthivel noted that the commerce minister had indicated India is expected to sign the agreement with the US soon. He added that benefits similar to those extended to Bangladesh’s textile sector are likely to be extended to India as well.
