India’s prospect of US reciprocal tariff exemption remains uncertain: DGFT Sarangi

New Delhi: With just four days to go before they kick in, it is still unclear if India is among the select group of countries that may be spared US President Donald Trump's reciprocal tariffs.

“Although President Trump has stated that limited exceptions for select countries could be worked out under the reciprocal tariffs set to take effect from 2 April, it is not yet known whether these exceptions will be extended to India,” director general of foreign trade (DGFT) Santosh Sarangi told Mint.

The statement draws significance as a US delegation led by Assistant US Trade Representative Brendan Lynch is in New Delhi for talks on a bilateral trade agreement (BTA) that started on Wednesday.

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On speculation about proposed tariff cuts by India, the DGFT said, "It is too early to make the kind of conjectures being made by some media people. So, it is premature to suggest that India will drop tariffs."

The negotiations are centered around a broader trade agreement expected by the US Fall 2025 (September-November), he said.

“While the US is keen on including agriculture in the discussions, India has sensitivities, given that its farmers are also major producers of items for which the US is seeking market access, such as corn and soy,” said Sarangi.

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India’s agricultural exports to the US have risen from $1.93 billion in FY22 to $2.02 billion in FY23 and $2.12 billion in FY24. By February of FY25, exports had already reached $2.28 billion. Key agricultural products exported to the US include spices, cereal preparations, rice, meat, dairy and poultry products, tea, coffee, and tobacco.

That said, a BTA with the US is easier than with other countries due to the complementarity in trade between the two sides, the DGFT said.

With India taking one measure after another to placate the US, the aim appears to be to secure an exemption from the list of countries facing the reciprocal tariff plan.

Also Read | US reciprocal tariffs unlikely to impact India much; may create opportunities: Niti Aayog Official

A day before Trump told reporters on Tuesday that he may grant many countries "breaks" from reciprocal tariffs—without giving details—India decided to drop the so-called Google Tax, a levy on multinational companies providing services in India.

And on Tuesday, India's tax regulator revised income tax rules to offer greater benefits to electric vehicle (EV) and EV battery makers. A circular from the Central Board of Direct Taxes (CBDT) expanded safe harbour rules by raising the eligibility threshold from ₹200 crore to ₹300 crore.

Additionally, lithium-ion batteries for electric and hybrid vehicles have been classified as core auto components, making them eligible for tax benefits. These changes are seen as part of India's strategy in the ongoing trade talks, where it is seeking better market access for its exports.

On Thursday, the DGFT extended the export obligationfor walnuts imported under the Advance Authorization Scheme, aligning it with the standard 18-month timeline applicable to most other products.

The Export Obligation Period (EOP) refers to the time frame within which an exporter must fulfill their export commitments under various trade policies and incentive schemes.

In India, this concept is commonly associated with schemes like the Export Promotion Capital Goods (EPCG) Scheme and Advance Authorization Scheme, where businesses are granted duty exemptions on imports in exchange for a commitment to export goods of a specified value within a set period.

The move provides relief to traders, who previously had to adhere to a much shorter deadline (180 days) for re-exporting processed walnuts, and is expected to benefit India’s key suppliers, including the US.

It will help the US as about 66% of walnuts are imported from the US, and due to the shorter time frame of 180 days, importers bring in less quantities since they have to re-export after processing to get tax benefits. Now that the norms have changed, importers will import more, and the US is the immediate beneficiary, analysts said.

To be sure, India has already cut the tariff on several US products, including bourbon whiskey (reduced from 150% to 100%), Harley-Davidson motorcycles (from 50% to 30%), and ethernet switches (20% to 10%).

The US is one of India's largest trading partners. The bilateral trade in goods and services reached around $190 billion last year, reflecting the deep economic ties between the two nations.

India enjoys a trade surplus of $36.8 billion with the US, largely driven by exports of pharmaceuticals, textiles, and IT services, while key imports include crude oil, aircraft, and agricultural products.

According to the joint statement issued on 13 February after a meeting between Indian Prime Minister Narendra Modi and Trump in Washington, both leaders agreed to expand bilateral trade to $500 billion over the next five years.

India's average weighted tariff, which stood at 17% in 2023, was reduced to 10.66% after duty changes in the Union Budget for FY26. As per the commerce ministry, the weighted average agricultural tariff, including for textiles, was 39%, while industrial goods faced a tariff of 13.5% in 2023.

The average weighted tariff is the actual tax that imported goods face on average, but it gives more importance to products that are imported in large quantities.

In the financial year 2023-24, the US was the third largest source of foreign direct investment (FDI) into India with inflows of $4.99 billion accounting for almost per cent of total FDI equity inflows.

Washington is also pushing New Delhi to buy more American oil, gas and military platforms to bring down the trade deficit.