India mulls over easing tariffs on gems & jewellery, garments via trade pact with US
NEW DELHI : India may be more agreeable to cutting tariffs on labour-intensive sectors such as gems and jewellery, automobile parts and textiles as part of the proposed trade deal with the United States (US), a government official said on condition of anonymity.
This would be in return for US lowering tariffs, possibly on its industrial goods exports to India. “The labour-intensive sectors include engineering goods as well,” this official added. Labour-intensive refers to a sector that requires a larger proportion of work-force to manufacture a product.
The effective customs duty on Indian exports of gold and silver, the key ingredients for gems and jewellery, is at 6 percent, while for engineering goods it majorly ranges from 7.5 to 10 percent and ready-made garments faces either 20 percent or a mix of tariffs.
On February 13, India and the US agreed on a new goal for bilateral trade – “Mission 500” – aiming to more than double total bilateral trade to $500 billion by 2030. In a bid to achieve this target the two sides also announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025.
Bilateral merchandise trade between India and the US stood at $82.53 billion as of April-November of the current fiscal year.
Both sides also pledged to collaborate to enhance bilateral trade by increasing US exports of industrial goods to India and Indian exports of labour-intensive manufactured products to the US.
To be sure, while both sides have agreed to cut tariffs via the proposed trade deal between them, the contours of the pact are yet to be finalised, including the areas in which India and US can reduce levies.
Both countries will decide on the details of the proposed agreement once the negotiating teams are in place, a second government official said, adding that the BTA will be mutually beneficial, with both sides going for reduction in tariffs.
The Finance Ministry has already taken steps to rationalise customs duties in the budget, many of which will benefit American exports.
Among the notable reductions that directly benefit American exports are lower duties on fish hydrolysate, synthetic flavouring essences, ground installation for satellites, including spares and consumables and on motorcycles based on engine capacity.
While, India’s total exports to the US in April-December 2024 amounted to $59.93 billion, among the labour-intensive sectors engineering goods came in at the top with nearly $14 billion, followed by gems and jewellery occupying the fourth place at almost $7 billion and ready-made garments of all textiles ranked fifth at $3.8 billion.
On the other hand, crude, petroleum products, cut and polished diamonds, electric machinery, and aircraft parts are some of the key goods India purchases from the US.
While, the two sides have also committed to increase trade in agricultural goods, there has been no discussion yet on the route to achieve this goal, including on the aspect of tariff reductions, the second official added.
These pledges were brokered during Prime Minister Shri Narendra Modi’s 36-hour visit to the US that ended in the early hours of February 14.
After the meeting between Trump and Modi, both countries promised to increase market access, reduce tariff and non-tariff barriers, and deepen supply chain integration, with India committing to buy more petroleum products and liquified natural gas from the US.
India ranks tenth among the top nations that export to the US, at $91 billion in 2024, with Mexico, China and Canada occupying the top three positions.
The US is India’s top export destination, and its fourth-largest source of imports.
Source : Moneycontrol