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.