India-US Bilateral Trade Pact Expected to Narrow India's Trade Surplus, Says CRISIL Report

Wednesday, June 25th: India’s substantial goods trade surplus with the United States, which stood at USD 41.18 billion in FY25, is likely to narrow significantly once the anticipated Bilateral Trade Agreement (BTA) is finalised, according to a recent research report by CRISIL.

Trade Balance Shift Expected Post-BTA

While the United States remains India’s largest export destination, the CRISIL report indicates that a comprehensive trade pact could rebalance this situation. The primary reason cited is India’s comparatively higher tariff regime. A reduction in these tariff barriers under the BTA is expected to boost US exports to India across several key sectors.

CRISIL’s analysis suggests that India is poised to increase imports from the US in areas such as:

• Energy products: Given that the US is a large exporter and India is a large importer of energy commodities like LNG, the BTA could facilitate greater trade.
• Select agricultural commodities: While India has shown discomfort in allowing access for US agricultural products, certain items like walnuts, pistachios, and cranberries could see increased imports.
• Defence equipment: India remains one of the largest arms importers globally, and with the US being the world’s largest arms exporter, defence imports into India could see a rise under the agreement.

Limited Upside for Indian Exports

Conversely, the report suggests that Indian exports to the US are unlikely to experience a dramatic surge under the BTA. A key factor is that many of India’s top export categories to the US, including smartphones, pharmaceuticals, textiles, and gems and jewellery, are already largely exempt from US duties.

Furthermore, the US administration’s focus on reducing its trade deficit with India limits the scope for further significant duty concessions on Indian goods. The US has frequently expressed concerns about India’s high tariffs and non-tariff barriers impacting American companies.

Negotiation Timeline and Strategic Context

In April 2025, the US implemented reciprocal tariffs on India and other nations but subsequently paused the tariff hikes for 90 days from April 10, creating a window for bilateral negotiations. This 90-day pause is set to expire on July 9, 2025.

The first tranche of the India-US BTA is expected to be completed by September 2025. While some reports suggest a possibility of an interim pact by the end of June, Indian officials have emphasised prioritising a balanced and mutually beneficial agreement over a rushed deal, especially given the upcoming deadline for the tariff pause. India is reportedly seeking assurances that the US administration will impose no further tariffs after the agreement.

Strategic Opportunity Amidst Rebalancing

Despite the potential narrowing of the trade surplus and limited tariff leverage, the CRISIL report highlights strategic opportunities for India. As the US remains the world’s largest importer, there is considerable scope for India to enhance its presence in high-potential export categories and strategically align its trade policies.

India’s total bilateral trade with the US reached USD 131.84 billion in FY25, with the US being India’s largest trading partner for the fourth consecutive year. To capitalise on this, India needs to focus on making its value-added sectors more competitive globally and explore deeper supply chain integration. The negotiations are a critical test for India to balance its domestic interests with fostering stronger economic ties with a key global partner.

What’s Next? 

India’s trade surplus with the US, currently at USD 41.18 billion, is expected to shrink after the proposed India-US Bilateral Trade Agreement (BTA), says a CRISIL report. The BTA may open Indian markets to more US energy, agriculture, and defence imports due to reduced tariffs. While Indian exports may see limited benefit, the pact offers a strategic chance to deepen economic ties and integrate into global supply chains. Negotiations continue ahead of the July 9 deadline for the tariff pause.

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