Officials say India’s generous proposal could speed up the proposed bilateral trade agreement (BTA), imposing a 26% reciprocal tariff from India, which came into force on April 9.
However, officials said the concession would comply with strict rules of origin, requiring an increase of at least 30-40% of value, as well as changes in tariff titles in part of these conditions.
“It’s all open to the mutual assistance that the U.S. bilateral trade agreement can provide,” said one person familiar with the discussion.
A solid rule of origin will prevent third-country goods from reaching India through the United States at low or zero tariffs.
Ministries and departments also seek industry feedback to cut tariffs in their respective departments. Some industry lobby groups, including export agencies, told the government to speed up BTA talks, with the first part of which ending within six months.
By 2030, both sides will have a goal of more than double the two-way transaction to reach $500 billion.
Currently, the PLI program covers 14 areas, including mobile phones, drones, white goods, telecommunications, textiles, automobiles, specialty steel and medicines, with expenditures of Rs 1.97 crore.
Officials say local manufacturers in these departments can bear zero import taxes. One official said tax benefits could be provided to products that benefit India’s labor costs.
“India’s industry in most areas is strong enough, especially post-manufacturing incentives like PLI, should be able to lower tariffs, which makes the current situation an opportunity to compete in global value chains,” said Indian tax partner Bipin Sapra. “Providing zero tariffs will allow India to occupy the U.S. market in industries that have been pushing for increased exports, which will in turn enhance exports in India.”
Another said the United States is also keen on strict value-added norms to ensure that third-country goods are not routed through India. In some departments, higher value-added levels can be checked.
Most trade conventions, including the free trade agreement signed by New Delhi, require an increase of about 35% of value, while changes in the tariff title at the four-digit level ensure a substantial shift.
