India and the United States recently concluded a Bilateral Trade Agreement (BTA) after extended negotiations marked by tariff escalations and geopolitical tensions. Following the announcement, an interim order reduced tariffs on Indian exports from 50% to 18%, providing immediate relief to several key sectors. Although the full text of the agreement has yet to be released, early indications suggest that the tariff reductions will benefit Indian exporters and help stabilise bilateral trade after a period of uncertainty. The agreement also presents a competitive challenge for South Asian neighbors, who face higher relative tariffs compared to India in the US market.
The United States is India’s largest export destination, accounting for roughly 22% of the country’s total global exports. Key sectors expected to benefit from the BTA include precious metals and stones, pharmaceuticals, apparel and textiles, machinery, and nuclear reactors. Agriculture was a sensitive topic during negotiations, and India successfully safeguarded core interests, notably excluding pulses from the revised US draft. However, the deal expands market access for several US agricultural products, including soybean oil, DDGS, and red sorghum, which may benefit India’s livestock sector but could increase competition for domestic oilseed farmers. Imports of nuts like walnuts, almonds, and pistachios are unlikely to pose major risks due to low domestic production.
The services sector, particularly IT-BPM, is another critical area, with the US accounting for over 50% of India’s exports in this sector, which contributes nearly 30% of formal job creation. The BTA could help reduce vulnerabilities in services by stabilising trade relations, though structural bottlenecks in manufacturing may widen the trade deficit if unaddressed. Labour-intensive industries, especially textiles, have strong growth potential if India undertakes reforms to improve competitiveness, supported by recent labour compliance initiatives. Alongside trade agreements with the UK and EU, the BTA positions India among the lowest-tariff economies in Asia, creating strategic opportunities to expand its global trade footprint.
For South Asia, the BTA could reshape regional trade dynamics. Countries such as Bangladesh, Pakistan, and Sri Lanka, which export textiles and leather, may face stiffer competition due to India’s preferential access and domestic cotton production advantage. Nepal, with limited production capacity, could also struggle to maintain competitiveness. However, the agreement presents opportunities for regional value chain integration, allowing neighboring countries to supply raw materials and intermediate goods to India for processing and export to the US. This could strengthen intra-SAARC trade, improve supply-chain resilience, and enable small and medium enterprises in the region to benefit indirectly from India’s enhanced market access.
The BTA, alongside India’s FTAs with the UK and EU, offers both opportunities and challenges to South Asian nations. Success will depend on investments in R&D, productivity improvements, and supply capacity. A US Supreme Court ruling on 20 February 2026 removed differential reciprocal duties, applying a universal 15% duty across countries, while the preferential tariff under the BTA continues to provide India with a duty advantage.
Overall, the India–US Bilateral Trade Agreement represents a major restructuring of bilateral economic relations. It provides significant benefits for Indian exporters and strengthens market access while posing strategic trade-offs for energy policy and regional diplomacy. For South Asia, the deal intensifies competition but also opens pathways for supply-chain integration. Against the backdrop of global trade shocks such as COVID-19, conflicts, climate disasters, and unilateral tariff hikes, the BTA underscores the importance of regional and international cooperation, particularly for supporting vulnerable developing economies in line with sustainable development goals.
