Limitations to enterprise: What American and Indian companies need Trump and Modi to do

Commerce relations between India and the US have lengthy been outlined by a fancy interaction of tariffs, non-tariff obstacles, and regulatory challenges. The annual Nationwide Commerce Estimate Report from the US Commerce Consultant (USTR) highlights the difficulties American companies face in accessing the Indian market.

On the similar time, Indian companies have raised considerations over restrictive US measures, prompting the Indian authorities to consolidate trade suggestions into a proper grievance platform. As Washington and New Delhi work towards resolving commerce tensions, each Prime Minister Narendra Modi and President Donald Trump are underneath rising strain to deal with these points.

Amid this backdrop, President Trump is ready to introduce a contemporary wave of tariffs right now, April 2, a date he has dramatically labelled as “Liberation Day.” The White Home has confirmed that he’ll announce the small print from the Rose Backyard at 4 pm native time. For world audiences, this interprets to eight pm GMT, whereas Indian viewers tuning in stay can anticipate the announcement round 1:30 am IST on April 3.

Though Trump and his administration haven’t explicitly outlined the specifics of the tariff package deal, the transfer aligns along with his broader purpose of addressing what he perceives as unfair “commerce imbalances” between the US and different nations—a stance that has repeatedly surfaced in his speeches and coverage statements. There is no such thing as a doubt that
US tariff information on India has been as carefully watched as the continued IPL, with companies and policymakers bracing for an surprising googly or a bouncer.

With the
Trump tariff struggle intensifying, the friction in India-US commerce ties goes past new tariffs—long-standing considerations over market entry and regulatory obstacles proceed to be sticking factors.

US considerations: Excessive tariffs and regulatory hurdles

The USTR’s annual report identifies India as a high-tariff regime nation, with New Delhi’s common Most Favoured Nation (MFN) utilized levy fee stood at 17 per cent in 2023, the best amongst main world economies. The agricultural sector stays notably affected, with common tariffs reaching 39 per cent and particular gadgets like alcoholic drinks (150 per cent), pure rubber (70 per cent), and low and walnuts (100 per cent) dealing with exorbitantly excessive duties. Nonetheless, for historic causes, nations reminiscent of India are inside their rights underneath the World Commerce Group (WTO) guidelines in levying excessive tariff on sure merchandise.

Non-agricultural items, together with cars, vegetable oils and processed meals are additionally topic to steep tariffs making market entry difficult for US exporters.

The USTR additionally views India’s commerce insurance policies as unpredictable and complaints about frequent modifications in duties, retaliatory tariffs and non-tariff obstacles—reminiscent of licensing necessities, authorities monopolies and opaque regulatory modifications. Its report stated such measures contribute to uncertainty for American companies.

The report refers to retaliatory tariffs of 1.7 per cent–20 per cent by India on 28 US merchandise in 2019 after the US revoked its Generalised System of Preferences (GSP) advantages. These duties had been, nevertheless, rescinded in 2023.

As Washington pressures New Delhi to decrease these obstacles, the newest tariff transfer from Trump may both add pressure to negotiations or pressure either side again to the desk for a broader commerce decision. The approaching days will reveal whether or not this escalation results in additional confrontation or a recalibration of financial ties between the 2 nations.

New obstacles: Digital financial system and knowledge localisation

Past conventional tariffs and non-tariff obstacles, the US has more and more flagged considerations over India’s regulatory framework within the digital financial system. The most recent USTR report identifies points associated to web shutdowns, open web insurance policies and stringent knowledge localisation necessities.

The Indian authorities mandates that monetary and private knowledge generated throughout the nation should be saved and processed regionally, a measure US companies argue will increase compliance prices and limits cross-border knowledge stream. Nonetheless, New Delhi considers this requirement as a necessity to guard pursuits of Indian companies and customers alike.

Moreover, India’s new laws surrounding embedded SIM (eSIM) expertise and roaming insurance policies have additionally drawn criticism. American telecom and expertise corporations contend that these insurance policies create market entry obstacles and enhance operational challenges for world corporations. The US is urging India to align its digital insurance policies, one thing India has proven its reservations over.

Non-tariff obstacles

Past tariffs and digital laws, American exporters proceed to grapple with India’s labelling, security and certification norms. The Bureau of Indian Requirements (BIS) mandates intensive high quality management orders (QCOs) throughout a number of industries together with chemical substances, electronics and medical units. The US companies argue that these necessities create further compliance prices and delay market entry. India argues that the BIS mandate is to guard client pursuits and relevant to all corporations, home or overseas.

Equally, India’s meals and agriculture import insurance policies stay a supply of competition. The US has raised considerations over India’s sluggish approval course of for genetically modified crops and non-science-based sanitary and phytosanitary (SPS) measures.

The necessary non-GMO certification for twenty-four agricultural merchandise together with these with out genetically modified (GM) alternate options has been a bone of competition for US exporters. Different commerce difficulties embody restrictions on dairy imports, ethanol import bans and arbitrary well being certification necessities for varied meals merchandise.

India Inc has a listing of complaints too

Whereas the USTR report extensively particulars the difficulties American companies face in India, Indian exporters have their very own checklist of complaints about US commerce obstacles. In accordance with a Occasions of India report, the Indian commerce ministry has obtained 22 formal grievances from home industries relating to restrictive measures imposed by the US. Experiences recommend New Delhi is creating a complete platform to consolidate suggestions and push for decision by means of bilateral commerce discussions.

Probably the most important obstacles confronted by Indian exporters is the excessive registration charges and stringent regulatory necessities imposed by the US Meals and Drug Administration (FDA). Indian pharmaceutical and chemical corporations have raised considerations over the prohibitive prices of acquiring FDA approvals, which frequently function a deterrent to market entry.

The trade argues that whereas high quality and security laws are important, the extreme bureaucratic pink tape disproportionately impacts small and medium-sized enterprises (SMEs) looking for to export to the US.

Equally, the US imposes stringent labeling and security necessities on toy imports including to compliance burdens for Indian producers. Indian exporters contend that these measures, whereas ostensibly aimed toward client safety, usually function de facto commerce obstacles by making Indian merchandise much less aggressive within the American market.

Indian textile exporters have additionally expressed considerations over the US’s evolving sustainability norms and environmental laws. American importers are more and more required to make sure that their provide chains adhere to strict sustainability and carbon footprint requirements.

Whereas the transfer in direction of eco-friendly commerce is laudable, Indian companies argue that the dearth of harmonised worldwide requirements and the excessive price of compliance put them at a drawback in comparison with opponents from developed nations.

One other urgent concern is the US’s laws on the origin of uncooked supplies, notably within the diamond and gemstone trade. Indian diamond exporters have flagged new necessities associated to the nation of mining origin as overly burdensome.

Provided that India is a serious hub for diamond reducing and sharpening, the trade is looking for higher flexibility in US customs laws to keep up its aggressive edge.

In search of decision by means of bilateral engagement

Amid these commerce disputes, each nations have sought to resolve excellent points by means of platforms like the US–India Commerce Coverage Discussion board (TPF). Established in 2005 and formalised in 2010, the TPF serves as the first discussion board for commerce and funding discussions between the 2 nations.

The 14th ministerial-level assembly, held in January 2024 in New Delhi, focussed on key commerce irritants, however lots of the longstanding points stay unresolved.

As India and the US deepen their strategic partnership, resolving commerce tensions will probably be essential for fostering stronger financial ties. Whereas India’s excessive tariffs and non-tariff obstacles pose challenges for US exporters, America’s stringent regulatory measures additionally create hurdles for Indian companies. Consultants emphasise the necessity to undertake a balanced method that promotes honest competitors whereas addressing respectable considerations associated to high quality, security and sustainability.

A name for pragmatic commerce insurance policies

India and US share one of the vital dynamic commerce relationships on this planet with bilateral commerce reaching $190 billion in 2023. Nonetheless, persistent commerce obstacles threaten to restrict the complete potential of this financial partnership.

As Prime Minister Modi and President Trump handle their challenges of their respective nations, there may be an pressing want for pragmatic commerce insurance policies that handle mutual considerations with out resorting to protectionist measures.

Addressing excessive tariffs, easing regulatory bottlenecks and making certain higher coverage predictability will probably be important for fostering a extra open and equitable buying and selling atmosphere. Whether or not the 2 leaders can discover frequent floor stays to be seen, however companies on either side are anticipating decisive motion to take away obstacles and unlock new alternatives for progress.

Loads will rely what Trump unravels along with his reciprocal tariff bulletins on the White Home’s Rose Backyard on Wednesday afternoon in Washington DC or previous midnight within the wee hours of Thursday, India time.