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.
Business
How inflation rebound is set to affect UK interest rates
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.
Business
Budget 2026: India pushes local industry as global tensions rise
India’s budget focuses on infrastructure and defence spending and tax breaks for data-centre investments.
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Business
New Income Tax Act 2025 to come into effect from April 1, key reliefs announced in Budget 2026
New Delhi: Finance Minister Nirmala Sitharaman on Sunday said that the Income Tax Act 2025 will come into effect from April 1, 2026, and the I-T forms have been redesigned such that ordinary citizens can comply without difficulty for ease of living.
The new measures include exemption on insurance interest awards, nil deduction certificates for small taxpayers, and extension of the ITR filing deadline for non-audit cases to August 31.
Individuals with ITR 1 and ITR 2 will continue to file I-T returns till July 31.
“In July 2024, I announced a comprehensive review of the Income Tax Act 1961. This was completed in record time, and the Income Tax Act 2025 will come into effect from April 1, 2026. The forms have been redesigned such that ordinary citizens can comply without difficulty, for) ease of living,” she said while presenting the Budget 2026-27
In a move that directly eases cash-flow pressure on individuals making overseas payments, the Union Budget announced lower tax collection at source across key categories.
“I propose to reduce the TCS rate on the sale of overseas tour programme packages from the current 5 per cent and 20 per cent to 2 per cent without any stipulation of amount. I propose to reduce the TCS rate for pursuing education and for medical purposes from 5 per cent to 2 per cent,” said Sitharaman.
She clarified withholding on services, adding that “supply of manpower services is proposed to be specifically brought within the ambit of payment contractors for the purpose of TDS to avoid ambiguity”.
“Thus, TDS on these services will be at the rate of either 1 per cent or 2 per cent only,” she mentioned during her Budget speech.
The Budget also proposes a tax holiday for foreign cloud companies using data centres in India till 2047.
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