India's Strategic Patience in US Trade Negotiations
India enters trade discussions with the United States with unprecedented confidence, bolstered by a robust economy and better-than-expected export performance despite significant tariff barriers. According to officials and analysts, New Delhi's strengthened position allows for more assertive negotiation tactics than ever before.
The United States imposed tariffs reaching 50% on Indian imports, yet the decline in India's shipments has proven less severe than initially projected. October data reveals exports to the US fell by 8.6% year-on-year to $6.3 billion, showing improvement from September's 12% decline recorded during the first month of Trump's 50% tariff implementation.
India's 'Ready to Wait' Approach
Indian authorities have maintained a patient stance, indicating no urgency to finalize an agreement prematurely. A senior government official involved in the negotiations confirmed that India has avoided the worst impacts of the US tariffs, providing crucial breathing room for strategic decision-making.
"For now, we've avoided the worst impact of the 50% US tariffs," the official stated, acknowledging that while specific sectors like textiles have experienced reduced orders, the broader economic effect remains contained. This measured impact gives India valuable time to negotiate favorable terms. The official emphasized, "If needed, we are ready to wait."
Negotiation participants anticipate the US will remove the 25% duty linked to India's Russian oil purchases and potentially reduce overall tariffs to approximately 15%. In return, India has prepared to lower import duties on over 80% of goods while maintaining protections for sensitive areas, particularly agriculture.
Government Support for Exporters
India has implemented multiple strategies to support its export sector during this challenging period. Officials highlighted several key measures including recent trade agreements with the United Kingdom, United Arab Emirates, and Australia, along with tax reductions on raw materials and a substantial $5.1 billion support package.
Exporters and industry groups report that many companies have successfully countered decreased US demand by expanding into African and European markets. Simultaneously, they're retaining American clients through strategic discounts and flexible delivery arrangements.
Apparel and footwear companies are absorbing additional costs up to 20% to maintain relationships with US buyers, according to Ajay Sahai, director general of the Federation of Indian Export Organisations. The government has introduced targeted relief measures including short-term loan moratoriums, though authorities have avoided large-scale fiscal stimulus programs.
Industry associations credit domestic tax cuts on hundreds of consumer goods introduced since September with strengthening local demand and helping exporters maintain price competitiveness. N. Thirukkumaran, general secretary of the Tirupur Exporters' Association, noted that reductions on inputs like man-made fibers have specifically supported textile shipments. He added that garment exporters are offering discounts between 10% and 20%, varying by design and shipment size.
Economic Strength and Global Competition
India's economic performance provides a solid foundation for its negotiation position. The economy grew 7% during the July-September quarter, with the central bank projecting 6.8% expansion for the current financial year.
However, exporters face significant challenges from increasing competition with Chinese products. Cheaper Chinese goods are entering multiple markets where Indian firms operate, putting pressure on margins and pricing power.
Rahul Tikoo, CEO of Mumbai-based specialty chemical manufacturer Optime, observed that "Chinese businesses are well-entrenched and their domestic situation has made them highly competitive."
October data reveals India's goods exports to non-US destinations fell 12.5% year-on-year, a sharper contraction than the decline in US-bound shipments. Engineering, petroleum, and jewelry items led this decline. HSBC chief India economist Pranjul Bhandari suggested this trend "may reflect heightened competition in non-US markets as countries diversify exports post tariff announcements."
Recent statements from both sides indicate progress in negotiations. US President Donald Trump mentioned that Washington is nearing an agreement with India that would expand economic and security cooperation. Commerce Minister Piyush Goyal similarly hinted that 'good news' might emerge once both countries agree to a fair and balanced deal.
