India-US trade treaty to energise exports: Finance ministry

By Admin

29 May, 2025

The prospect of a successful trade agreement between India and the United States holds significant promise to transform current challenges into opportunities, energising India’s export sector and opening new avenues in global markets. A recent report by the Finance Ministry, released in April, underscores this optimistic outlook while also highlighting ongoing global uncertainties that need careful navigation.

Transforming Trade Challenges into Growth Opportunities

India and the US are actively engaged in negotiations to finalise a bilateral trade deal, with indications that the first phase of the agreement could be signed before July. This agreement is expected to alleviate the uncertainties caused by recent trade tensions, including the US’s imposition of a 26% tariff on Indian imports starting April. Though a 90-day suspension on these tariffs is currently in effect, pending bilateral discussions, the threat of renewed trade barriers remains a concern.

The Finance Ministry report points out that a comprehensive trade treaty could convert such headwinds into tailwinds by providing Indian exporters with better access to the vast US market, thereby boosting export volumes and strengthening India’s global trade position.

Private Investment and Growth Outlook Amid Global Uncertainty

The report also draws attention to potential risks in private sector capital expenditure. Global uncertainties and tighter financial conditions are causing firms to adopt a more cautious approach. Despite these challenges, India continues to shine as one of the most attractive investment destinations worldwide.

Foreign direct investors are expected to respond positively to policies aimed at enhancing medium-term growth prospects. Specifically, the report emphasizes the importance of initiatives that improve the skills and productivity of India’s young workforce, which can create a virtuous cycle of investment and growth.

India's Robust Economic Fundamentals

Despite a recent downward revision in growth rates due to global challenges, India remains the fastest-growing major economy. Projections from various agencies estimate GDP growth in the range of 6.3% to 6.7% for the financial year 2025-26. This optimistic forecast is underpinned by strong domestic fundamentals, prudent macroeconomic management, and increased government capital expenditure.

Positive Inflation and Food Security Outlook

Another key highlight from the Finance Ministry report is the benign outlook on inflation, particularly food inflation. The report attributes this to a successful rabi crop harvest, expanded cultivation under summer crops, and healthy foodgrain procurement efforts. The Indian Meteorological Department’s forecast of an above-normal monsoon season further supports expectations of stable food prices.

Low core inflation and declining food prices are creating a favorable environment for monetary policy, with the Reserve Bank of India (RBI) likely to maintain accommodative measures to foster economic growth. Recent RBI surveys also indicate reduced inflation expectations, reinforcing positive market sentiment.

Conclusion

While global uncertainties and trade tensions pose challenges, the India-US trade treaty promises to be a crucial catalyst for revitalising India’s export sector and sustaining economic growth. Coupled with solid domestic fundamentals, strategic policy support, and a favorable inflation environment, India is well-positioned to navigate external vulnerabilities and emerge stronger on the global economic stage.