Business
India-US Trade Deal On The Horizon? What Surging Imports And Reforms Mean For The Economy
New Delhi: A high-level US trade delegation, led by Deputy US Trade Representative Rick Switzer and chief negotiator Brendan Lynch, arrived in India on December 9 to begin two days of intensive talks aimed at concluding the long-pending India-US trade deal. The discussions come at a crucial juncture, with tariffs and trade uncertainties affecting investment and exports and New Delhi working to adjust its industrial and trade policies.
The delegation’s visit shows fresh momentum in a negotiation process that has stretched over months. Commerce Secretary Rajesh Agrawal described the talks as “only a matter of time” away from a final decision. It reflects optimism in New Delhi that a deal is within reach.
India Narrows Trade Gap With Surge In US Imports
India’s goods trade surplus with the United States has shrunk considerably in recent months, showing increased imports from Washington amid high US tariffs. According to data from the Ministry of Commerce, the surplus fell from $3.17 billion in April to $1.45 billion in October.
Exports to the United States declined from $6.86 billion in August to $6.30 billion in October, while imports rose steeply from $3.6 billion to $4.84 billion. The slowdown in exports has been most visible in labour-intensive sectors such as garments, footwear and sports goods.
US Crude Gains, Russia’s Share Declines
The rise in US imports is especially notable in crude oil and liquefied petroleum gas (LPG). Following sanctions on Russian oil companies Lukoil and Rosneft, India’s share of Russian oil imports dropped from 37.88 percent to 32.18 percent between April and October.
Meanwhile, US crude accounted for 7.48 percent of India’s imports during the same period, nearly doubling from last year’s 4.43 percent.
Indian refiners also signed a one-year deal for US LPG imports last month, adding 2.2 million tonnes annually, which is close to 10 percent of India’s total LPG imports. These developments signal a strategic realignment in energy sourcing ahead of the trade deal.
Nuclear, Industrial Reforms Add Momentum
India has signalled openness to closer cooperation in nuclear power under the trade deal. Prime Minister Narendra Modi has indicated that India’s traditionally restricted nuclear sector will be opened to private participation, aligning with US interests in expanding existing plants and small modular reactors.
At the same time, India has accelerated reforms to boost manufacturing and ease tariff pressures. The government rolled back several quality control orders affecting MSMEs, removed the 11 percent duty on cotton to relieve the textile sector and implemented long-pending labour codes.
GST rate rationalisation earlier this year also eased costs for essential goods, reflecting a broader effort to make Indian industry more competitive amid international trade pressures.
Investment, Capital Flows, Currency Pressures
The uncertainty around US tariffs has affected capital flows and investment. A Bank of America (BoFA) report highlighted concerns over FDI, FPI and debt-related inflows, stating that the Reserve Bank of India (RBI) has sold $65 billion in the open market and maintained a forward position of $63.6 billion to manage pressures on the rupee.
The Indian currency has weakened roughly 7 percent over the past year, leading to a 9 percent depreciation in the real effective exchange rate. These factors highlight the urgency for a finalised trade deal and the ongoing policy adjustments by New Delhi.
Broader Trade Strategy
Beyond the United States, India has been pursuing trade agreements also with other major markets. Negotiations are underway with the European Union, New Zealand, Israel, Chile, Peru, Russia and the Eurasian Economic Union.
These efforts form part of India’s larger strategy to diversify trade and reduce dependence on markets with volatile tariffs.
As the US delegation begins its talks, both nations are poised to influence the next phase of bilateral trade. India’s policy adjustments, energy diversification and reform push indicate an intent to strengthen competitiveness, attract investment and secure its position in global trade even before a final deal is reached.
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Piyush Goyal termed the Budget “economically and fundamentally very strong”, and stated that it “reflects the aspirations of the youth of the country”.
Minister of Commerce and Industry Piyush Goyal. (File photo)
Union Minister Piyush Goyal on Sunday termed Budget 2026 “futuristic and holistic”, and stated that it “reflects the aspirations of the youth of the country and is forward-looking”.
Speaking exclusively to CNN-News18 on Budget 2026, presented by Finance Minister Nirmala Sitharaman, Goyal said, “This is a fabulous budget and it is very futuristic. The Budget 2026 has covered all sectors including technology, infrastructure, etc.”
“The technology sector has been given a thrust. The budget focuses on infrastructure. It is a holistic and forward-looking budget refecting future ready Bharat,” he said, adding, “The budget meets the aspirations of the youth and new India.”
Stating that the Budget is economically and fundamentally very strong, the Union Minister said, “Farmers, animal husbandry and labour-intensive sectors get a major push as this Budget focuses on investment, value addition and jobs.”
#Exclusive | “The Budget is economically and fundamentally very strong,”Preparing India for Viksit Bharat. Farmers, animal husbandry and labour-intensive sectors get a major push as the Budget focuses on investment, value addition and jobs.@Parikshitl in an exclusive… pic.twitter.com/tJr2SItcaW
— News18 (@CNNnews18) February 1, 2026
‘Budget 2026 Is Human-Centric’: PM Modi
Prime Minister Narendra Modi on Sunday said that the Union Budget 2026 is “human-centric and strengthens India’s foundation with path-breaking reforms.” The Prime Minister also described it as historic and a catalyst for accelerating the country’s reform trajectory and long-term growth.
Following the presentation of the Budget in Parliament, PM Modi said the proposals would energise the economy, empower citizens and give India’s youth fresh opportunities to scale new heights.
“This budget brings the dreams of the present to life and strengthens the foundation of India’s bright future. This budget is a strong foundation for our high-flying aspirations of a developed India by 2047,” he said.
Calling the government’s reform agenda a “Reform Express”, the Prime Minister added, “The reform express that India is riding today will gain new energy and new momentum from this budget.”
February 01, 2026, 19:01 IST
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Interest rates are widely expected to remain at 3.75% as Bank of England policymakers prioritise curbing above-target inflation while also monitoring economic growth, according to expert analysis.
The Bank’s Monetary Policy Committee (MPC) is anticipated to leave borrowing costs unchanged when it announces its latest decision on Thursday, marking its first interest rate setting meeting of the year.
This follows a rate cut delivered before Christmas, which was the fourth such reduction.
At the time, Governor Andrew Bailey noted that the UK had “passed the recent peak in inflation and it has continued to fall”, enabling the MPC to ease borrowing costs. However, he cautioned that any further cuts would be a “closer call”.
Since that decision, official data has revealed that inflation unexpectedly rebounded in December, rising for the first time in five months.
The Consumer Prices Index (CPI) inflation rate reached 3.4% for the month, an increase from 3.2% in November, with factors such as tobacco duties and airfares contributing to the upward pressure on prices.
Economists suggest this inflation uptick is likely to reinforce the MPC’s inclination to keep rates steady this month.
Philip Shaw, an analyst for Investec, stated: “The principal reason to hold off from easing again is that at 3.4% in December, inflation remains well above the 2% target.”
He added: “But with the stance of policy less restrictive than previously, there are greater risks that further easing is unwarranted.”
Shaw also highlighted other data points the MPC would consider, including gross domestic product (GDP), which saw a return to growth of 0.3% in November – a potentially encouraging sign for policymakers.
Matt Swannell, chief economic advisor to the EY ITEM Club, affirmed: “Keeping bank rate unchanged at 3.75% at next week’s meeting looks a near-certainty.”
He noted that while some MPC members who favoured a cut in December still have concerns about persistent wage growth and inflation, recent data has not been compelling enough to prompt back-to-back reductions.
Edward Allenby, senior economic advisor at Oxford Economics, forecasts the next rate cut to occur in April.
He explained: “The MPC will continue to face a delicate balancing act between supporting growth and preventing inflation from becoming entrenched, with forthcoming data on pay settlements likely to play a decisive role in shaping the next policy move.”
The Bank’s policymakers have consistently voiced concerns regarding the pace of wage increases in the UK, which can fuel overall inflation.
India’s budget focuses on infrastructure and defence spending and tax breaks for data-centre investments.
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