Editor’s Note
A new report underscores that India’s long-term economic strength hinges on embracing greater trade openness and accelerating domestic reforms. This analysis arrives as India and the U.S. negotiate an interim trade agreement, framing a critical debate on the nation’s future economic path.
A significant report released amid the India-US interim trade agreement states that for India to remain strong in the global market over the long term, it must adopt greater openness in trade and accelerate necessary reforms.
This report by Systematics details that it is essential to reform the inverted duty structure, reduce the cost of raw materials by simplifying logistics and customs procedures, and promote large-scale production and employment generation by boosting assembly-based manufacturing. Simultaneously, it is imperative to reduce protectionist policies, increase the number of free trade agreements, strengthen investment in research and development, and remove barriers related to land, labor, and skills.
These steps together will lead India towards advanced manufacturing, ensure deeper integration with global value chains, and mitigate the risks of stringent trade policies. This will enhance the country’s long-term competitive capacity.
The bilateral agreement concluded on February 7, 2026, ensures equal market access for both countries. India has agreed to reduce or eliminate tariffs on US industrial goods, DDGS, red sorghum, nuts, fruits, soybean oil, alcohol, etc.
In return, the US has imposed an 18% duty on Indian textiles, leather, plastics, chemicals, and machinery. Upon successful implementation of the agreement, there is a provision to remove duties on generic drugs, gems & jewelry, and aircraft parts.
The US aims to maintain a trade balance, while India will gain tariff relief, which will limit US duties on its products to up to 18%. According to the Commerce Minister, this will boost employment-oriented sectors, Make in India, and Atmanirbhar Bharat (Self-Reliant India).
National security-based duties on aircraft and parts will be removed, and auto parts will receive a special quota. This will provide immense growth opportunities for the aviation and manufacturing sectors.