Ajit Ranade: We should welcome the India-US trade agreement but need to parse the fine print

Subscribe to enjoy similar stories. Markets love certainty, or rather its appearance. That is why our equity market cheered the announcement of an interim India-US trade deal framework even though the ‘fine print’ is still not fully in the public domain.

Its 18% reciprocal tariff on Indian-origin goods entering the US has been treated as a diplomatic trophy and a commercial windfall. But trade deals, like monsoon rains, are judged not by the first thunderclap but by rainfall distribution. The joint statement issued by the White House says that this is a framework for an interim agreement, with negotiations due for a broader bilateral trade agreement.

Apart from the US commitment to apply an 18% reciprocal tariff on Indian goods, it signals tariff removals (or adjustments) on a “wide range of goods" contingent on the successful conclusion of talks, with sectoral references spanning textiles and apparel, leather and footwear, home décor, artisanal products and certain machinery, among others. It also emphasizes rules of origin, easing of non-tariff barriers and a pathway to digital trade rules in an eventual agreement. That is already a clue for sober readers: the market is reacting to a direction of travel.

The economic outcome will depend ultimately on the terms of arrival. An 18% tariff is better than what most other US partners face, so it gives India a competitive edge, especially in some labour-intensive categories like garments, footwear and home-textiles. Orders can shift quickly as buyers diversify supply chains.

But bear two cautions in mind. First, tariffs are only one part of the landed-cost equation. Compliance costs, standards, logistics, lead times and rule-of-origin documentation can eat away the advantage.