India-US Trade Deal to Bolster Economy with $45 Billion Annual Surplus; Reciprocal Tariffs Set at 18%

Mumbai : A comprehensive report by SBI Research highlights a transformative era for Indian exports following the landmark India-US trade agreement. The deal, which establishes a reciprocal tariff rate of 18%, is projected to generate an additional annual trade surplus of at least $45 billion for India, equivalent to 1.1% of the GDP. This strategic alignment follows similar agreements with the EU and UK, positioning India as a global trade powerhouse. Beyond the surplus, the deal is expected to save approximately $3 billion in foreign exchange reserves annually, providing a significant cushion to the national economy.

The agreement marks a major win for several Indian sectors, including textiles, apparel, leather, footwear, and machinery, which will now benefit from the 18% reciprocal tariff. Furthermore, the US has agreed to remove tariffs on certain Indian aircraft parts, while India has secured a preferential tariff rate quota for automotive parts. In exchange, India will reduce or eliminate tariffs on various US industrial and agricultural products, such as tree nuts, fruits, and spirits. This balanced approach ensures that India gains substantial market access without compromising on domestic sensitivities.

As India's export trajectory strengthens, SBI Research projects that export credit will play a vital role in sustaining this momentum. The report indicates a high correlation (0.77) between export growth and credit demand, estimating that every 1% increase in exports will lead to a 1.28% rise in export credit. While the current trade credit gap is projected at $525 billion by 2030, the new trade deal is expected to act as a catalyst for financial institutions to bridge this shortfall and support the growing aspirations of Indian exporters.