India and the United States may ink a mini trade deal by Monday to avoid a 26 per cent reciprocal tariff, which is set to kick in from July 9, with the two countries seeking to reduce disagreements over opening access to Indian markets for US agricultural and dairy products.
The Indian team of negotiators, led by would-be commerce secretary Rajesh Agarwal, is on an extended stay in Washington for the talks as India aspires to be only the third country after the UK and Vietnam to reach a trade deal with the Donald Trump-led US administration.
While there continues to be oppositions to opening the agri sector and put farmers, who represent a key voting block in India, to competition with imported US products, the Modi government appears to be ready to make a few concessions, such as allowing imports of some processed, genetically modified (GM) US farm products to strike a deal.
India may agree to inbound shipments of some products used in animal feeds, such as soybean meal and distillers’ dried grains with solubles, a by-product of corn-based ethanol production, Bloomberg reported on Thursday.
The world’s most populous country is opposed to imports of GM
corn and soybeans, and does not permit local farmers to grow them for food.
The commercial release of GM mustard was stalled due to a legal challenge in the country’s top court, and in 2010, the government rejected a GM variety of brinjal.
Industry concern
Rajiv Memani, the newly-appointed president of CII, India’s largest trade body, underscored the need for a ‘balanced and reasonable’ trade deal and suggested that the government should take time to deal with tricky issues.
Memani, who is also the chairperson of EY India, said CII expected the bilateral trade deal to take place in phases. “Those areas which are more tricky, which require more consultation, have greater political ramifications, may be dealt with later on,” Memani was quoted as saying by news agency PTI.
Indian industry is going to face more competition from imported items hitting the domestic market, taking advantage of lower duties, but Memani sounded confident that challenges would be adequately addressed by the government.
Competitive landscape
While Memani cautioned that India would not be a ‘100 per cent winner’ in all issues, rating agency Moody’s suggested that India would still be better placed than many other countries in the Asia Pacific region.
“In contrast to countries such as Cambodia and Vietnam, India has the potential to emerge as a beneficiary of a tariff-driven shift in investment and trade flows,” Moody’s said in its latest outlook for the Asia Pacific region.
The agency believes that “India may be subject to lower tariffs than many in APAC, which could help the economy attract further investment flows and support its development as a global manufacturing base.”
Vietnam will continue to pay a 20 per cent duty to access US markets, according to the announcement made by Trump last evening. For the transhipped products, the duty for Vietnamese products will be 40 per cent, potentially impacting Chinese interests. However, Reuters reported, quoting officials in Hanoi, that final contours were still being worked on.