Editor’s Note
This analysis highlights a potential $45 billion boost to India’s trade surplus with the US, a significant development that could strengthen exports and reshape global supply chain dynamics.
According to a latest report by SBI Research, the evolving new trade relations between India and the United States could bring significant economic benefits to the Indian economy. The report estimates that India’s trade surplus with the US could increase by up to $45 billion due to bilateral trade agreements and changes in tariff structure. This development is seen as a major step towards strengthening India’s export capacity and expanding its role in the global supply chain.
The report identifies 15 key product categories with the highest potential for export growth. Currently, India’s share in the total US import market of $3 trillion is approximately 3%. According to SBI’s report, sectors such as electrical machinery, pharmaceuticals, engineering goods, gems & jewellery, and textiles have significant potential to meet ‘unmet demand’. The export potential in these sectors is estimated to exceed $100 billion annually, which will provide expansion opportunities not only for large corporations but also for Micro, Small and Medium Enterprises (MSMEs).
Concessions granted to the agriculture sector under the trade deal are particularly significant. According to the report, nearly 75% of India’s agricultural exports will now face zero additional tariffs in the US. Direct benefits are expected for exporters of rice, spices, tea, coffee, cashews, and seafood. The US currently imports 25% of its rice requirement from India, and this quantity is likely to increase further after the tariff reduction. This will increase foreign exchange flow into the rural economy and improve income in the primary sector.
Trade discussions between India and the US have emphasized rationalizing tariffs. Tariff barriers are being reduced to make Indian goods competitive compared to Vietnam and other Southeast Asian countries. According to the report, India has also planned to purchase $500 billion worth of products from the US in aviation, energy, and high-tech sectors over the next five years. This mutual cooperation is aimed at maintaining trade balance between the two countries and strengthening long-term strategic partnership.
Under the globally adopted ‘China+1’ strategy, India is emerging as a major manufacturing hub. SBI’s report indicates that US companies are now reducing their dependence on China for their supply chains and viewing India as a reliable alternative. US investment is likely to increase, particularly in electronics and high-tech manufacturing. This strategic shift will help establish India as a key player in the Global Value Chain, which is expected to increase industrial production and employment opportunities.