India Should Not Agree To Anything Impinging Sovereignty in The Trade Deal With US
As part of the trade deal, the US wants India to align with its economic actions and policies on third countries, says Ajay Srivastava, founder of GTRI
By : Sangeetha G
Update: 2026-02-12 17:12 GMT
Chennai: As part of the trade deal, the US wants India to align with its economic actions and policies on third countries, says Ajay Srivastava, founder of GTRI in an interview with Financial Chronicle. He wants the government not to agree to anything that impinges our sovereignty.
Q) The joint statement on the interim framework says that the countries have agreed to take complementary actions to address non-market policies of third parties. How is this statement detrimental to our economic sovereignty?
The joint statement says that India and the US will align their policies, security and economic policies while dealing with non-market economies. The most well-known non-market economy is China, we can say Russia also. So we know today the US recognizes China as G2, is a superpower next to the US and they are always in tiff. So the US wants to put down China. If they take actions against China, for example, banning the sale of semiconductors tomorrow, India will have to be in sync with the US. So that means independence of our foreign policy may not be there to the full extent. Now, since it is only a joint statement, we'll see how these things are elaborated on the legal text whenever it comes. So we sincerely hope that India takes care not to agree to elaborate on any such things which impinge on its sovereign decision-making.
Q) The statement also says that the countries will address "discriminatory and burdensome practices and barriers in digital trade". What are our barriers and how will this decision affect our digital trade?
If a country introduces one regulation which is not liked by another country, it immediately calls it a barrier. When we allow import of a good, we take custom duties because we want to favour our local companies over the imports. If we are taxing the foreign technology companies, it's for that purpose only. Now, we have abolished the digital tax last year. But if we agree to this, in the joint statement and later on the legal text, that means in future we can never introduce it. Everything is getting digital gradually. We lose an opportunity for the future also. Since everything is getting digital, the tax collection from the digital side will have to increase. Now we'll be tying our hands by agreeing to such demands.
Q) Coming to agriculture. There is no direct mention of these controversial topics, but there are a few sentences and phrases in the statement that means that we have agreed to allow entry of genetically modified crops and dairy products. Tell us about those.
There is a cryptic mention of "other agriculture products" which have been allowed. So we don't know how many of them are there, which are additional products, and how long the list is? We have to wait for the legal text.
Q) The US wants the non-tariff barriers to be removed on food and agricultural products. That India has agreed. That's what the statement says.
If we feel something is a real barrier, of course we can remove it not only for the US but for everyone. Otherwise, we should stay patient and not compromise on this.
In the trade deal, India has agreed to buy goods worth 100 billion every year. There is no similar purchase commitment from them. Commerce Minister Piyush Goyal has said that this is possible, I mean it is possible to increase our imports to 100 billion in a year by buying natural gas, oil and aircraft. Is this possible?
We are currently buying $45 billion worth of goods. Price of an average Boeing, large size Boeing is $300 million. India currently has about 200 Boeings. Suppose we add the entire fleet again, it will be $60 billion. It is still a large deficit. We have increased our purchases of US oil, LNG and they have gone up by 80 per cent in the last one year alone. But the US doesn't have enough spare oil. So I think meeting this bill will be very, very difficult and not to say that this will add to our import cost, it will increase our trade deficit, CAD and all those things.
Q) Further these imports are going to turn our trade surplus with the US into a trade deficit. What will be the impact of higher trade deficit on rupee and inflation?
Higher trade deficit means we are importing more, exporting less. So that means we have less dollars. That means the rupee will go down. It's simple arithmetic.
Q) The imported inflation will also go up.
Yes, if the rupee goes down that is linked to inflation.
The US also has said that it will re-impose tariffs if India buys oil from Russia. How fragile and one-sided is this deal?
If they have any proof that India is buying oil from Russia, they may reintroduce these tariffs and more penalties. The Indian government is cryptically silent on this part. So the trade deal is only about cutting your tariff from 25 per cent to 18 per cent. So, for getting 7 per cent benefit, we are giving so much to the US and oil is different here.
Q) Overall if you look at the join statement, what is your impression?
The joint statement gives an immediate relief to the labour intensive sectors. These reciprocal tariffs were applicable only on 55 per cent of our exports, mostly labour-intensive goods. They have to continue paying whatever applicable regular MFN tariffs. But I don't agree with this enthusiasm that exports will touch $300 billion or more. They were $85 billion when the US average tariff was 3 per cent and now average tariff is 21 per cent. How can you say 3 to 21 will increase our exports? At best, if you are lucky, we can retain the same level of exports to the US. And imports are going to rise as you rightly said because of our commitment to buy more from the US.
The interview can be viewed here https://youtu.be/0jjefbQBiZw?si=lOgvLO2Su9Ry1JR1