India’s Trade Balance With US To Fall From Surplus To Deficit
US trade deal framework may push India into trade deficit, $500-billion import target seen as unrealistic
Chennai: As agreed in the interim framework of the trade deal with the US, if India fulfils the $500 billion import commitment, the country’s trade balance will fall from surplus to deficit next year. However, fulfilling the commitment looks implausible to meet.
The framework statement said that India intends to purchase $500 billion of U.S. energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.
In FY25, the US imports into India stood at $48 billion and exports to the US $86.5 billion. The $100 billion imports per year will double the imports from the US and make India’s trade balance swing from surplus to deficit. From next year, India will have a trade deficit with the two large economies – the US and China.
However, this looks unlikely as aircraft are a major component of this commitment. At present, India operates around 200 Boeing aircraft. Even if India adds another 200 Boeing aircraft over the next five years, at an estimated cost of $300 million per aircraft, the total value would be about $60 billion. Moreover, such purchasing decisions are made by private airlines, not by the government.
The framework also saud that India has agreed to remove non-tariff barriers on food and agricultural products. Going by the terms of similar deals entered with other countries, this will let genetically modified soyabean, corn and dairy products into the country.
“Recognizing the importance of working together to resolve long-standing concerns, India also agrees to address long-standing non-tariff barriers to the trade in U.S. food and agricultural products,” the statement said.
Under its trade deal, Malaysia has a similar provision, which allows imports of dairy, meat, and poultry products from the US if they have the sanitary and health certificates from the relevant American authorities. This concession implies that the US certification would prevail over Malaysia’s domestic health and sanitary requirements, finds GTRI.
Further, India will eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products,” the framework said. But it did not specify which the additional products are.
Both these provisions can lead to the entry of genetically-modified foods like maize, soya bean, cotton and corn as well as dairy products of cows fed on animal feed.
