New Delhi, February 9: A recent report highlights the need for India to prioritize trade openness and essential reforms to remain competitive in the long term amid the interim trade agreement with the United States.
According to the report by Systematics, India must address inverted duty structures, simplify logistics and customs processes to reduce raw material costs, and promote assembly-based manufacturing for mass production and job creation. Additionally, it emphasizes the importance of reducing protectionism, enhancing free trade agreements (FTAs), strengthening research and development (R&D), and resolving issues related to land, labor, and skills.
The report suggests that this comprehensive strategy will propel India towards advanced manufacturing, firmly integrate it into the global value chain (GVC), and help mitigate risks associated with Donald Trump’s stringent trade policies, ultimately boosting long-term competitiveness.
Under the India-U.S. trade agreement, India gains tariff relief and improved access to the U.S. market. However, this comes with commitments, including a $500 billion import obligation and restrictions on oil imports.
The bilateral trade agreement, finalized on February 7, 2026, emphasizes equal market access for both countries. India has agreed to reduce or eliminate tariffs on U.S. industrial goods, food products, and agricultural items such as Distillers Dried Grains with Solubles (DDGS), red sorghum, nuts, fruits, soybean oil, alcohol, and spirits.
In return, the U.S. has set an 18% tariff on certain Indian products, including textiles, apparel, leather, plastics, chemicals, and machinery. Furthermore, there are plans to eliminate tariffs on generic drugs, gemstones, and aircraft parts, contingent upon the proper implementation of the interim agreement.
From the U.S. perspective, this framework aims to maintain trade balance and eliminate barriers present in the American market.
The report indicates that this deal brings tariff relief for India, potentially lowering effective tariffs on Indian products in the U.S. to 18%, which is lower than many competing countries. According to India’s Commerce Minister, this will support job-oriented sectors and initiatives like Make in India and Atmanirbhar Bharat (Self-Reliant India).
The agreement will also remove tariffs on aircraft and their parts imposed under national security claims, providing a special quota for automobile parts, thereby aiding growth in the aviation and manufacturing sectors.
