India–US trade deal could lift surplus by $45 bn, exports could top $100 bn annually: SBI Report

• India–US trade deal could raise India’s annual surplus by $45 billion and exports by over $100 billion.

• Tariffs cut to 18%, boosting India’s competitiveness against Asian peers.

• Potential 1.1% GDP gain and $3 billion annual forex savings.

• Strong export scope in machinery, pharma, textiles, autos, gems, seafood.

• Agriculture benefits from wider zero-duty access.

• Supports China+1 diversification and manufacturing growth.

  
  

India’s commercial ties with the United States appear to be entering a transformative phase. A recent assessment by SBI Research suggests that the newly signed bilateral trade agreement could significantly reshape trade flows between the two nations. The report projects that India’s annual trade surplus with the US may expand by $45 billion, while export opportunities could exceed $100 billion each year under the revised framework.

At the core of this anticipated shift is a reduction in reciprocal tariffs on Indian goods, now set at 18%. This adjustment meaningfully improves India’s competitive standing in the American market, placing it ahead of several Asian exporting nations, including Vietnam and many ASEAN members. With comparatively lower tariff barriers, Indian products are expected to gain pricing advantages across multiple industries, enhancing their appeal to US buyers.

According to SBI Research, the tariff recalibration—combined with unmet demand in the US—could drive a sharp increase in Indian goods exports. The analysis estimates an annual export boost of around $100 billion. Even after factoring in a projected $55 billion rise in imports from the United States, India’s net goods trade surplus could grow by $45 billion, pushing the overall surplus beyond $90 billion per year. Economically, this could translate into a 1.1% uplift to India’s GDP. Additionally, lower import duties are expected to generate foreign exchange savings of roughly $3 billion annually.

A key factor supporting this optimistic outlook is the sizable demand–supply gap in the US market. American imports in major product segments exceed $3 trillion annually, yet India currently accounts for only about 3% of that volume. This disparity underscores significant room for expansion. Industries such as electrical machinery, pharmaceuticals, engineering goods, textiles, chemicals, gems and jewellery, automobiles, and seafood are particularly well-positioned to scale up exports, as US demand far outpaces India’s current supply footprint.

The report highlights that the top 15 export categories alone could contribute nearly $97 billion in additional annual shipments. When other commodities are included, total export gains are expected to comfortably surpass the $100 billion threshold. Among the strongest performers are likely to be electrical machinery and equipment, nuclear reactors and mechanical appliances, pharmaceutical products, vehicles, and gems and jewellery. These sectors combine established manufacturing capabilities with strong US demand, making them natural beneficiaries of the revised trade terms.

Agriculture also stands to gain substantially from the agreement. Approximately three-quarters of India’s agricultural exports to the US will now be subject to zero additional tariffs. This change covers a broad array of products, including rice, spices, tea, coffee, oilseeds, nuts, and seafood. India currently maintains an agricultural trade surplus of about $1.3 billion with the United States, and reduced tariff barriers are expected to strengthen this position further.

The implications for farmers and allied sectors are significant. The United States already sources nearly a quarter of its rice imports from India, and demand for Indian seafood and spices has been steadily rising. Lower duties could enhance price competitiveness and allow exporters to capture a larger share of the American market. Plantation-linked industries and fisheries, in particular, may see tangible benefits as access improves.

On the other side of the ledger, India has committed to lowering or eliminating tariffs on a range of American industrial and agricultural goods. The government has also signaled its intent to purchase $500 billion worth of US products over the next five years. These planned imports span energy supplies, aircraft, technology equipment, and precious metals. While annual imports from the US could increase by an estimated $55 billion, SBI Research emphasizes that the overall trade balance will continue to favor India.

Beyond immediate trade flows, the agreement may have broader strategic consequences. One notable opportunity lies in supply chain diversification, particularly under the “China+1” strategy that many multinational firms are pursuing. As companies look to reduce dependence on China, India could emerge as a viable alternative manufacturing hub, especially in electronics and electrical equipment.

SBI Research points to the potential for US firms to expand investments in India, focusing on value addition and local manufacturing. Such investments could replace certain imports from China while using India as a base for exporting finished goods to global markets. This would not only deepen bilateral trade ties but also integrate India more firmly into international production networks.

Crucially, the agreement appears to balance export competitiveness with domestic sensitivities. By lowering tariffs strategically while safeguarding critical sectors, India has positioned itself to expand manufacturing and exports without exposing vulnerable industries to sudden disruption. The projected gains—stronger trade balances, increased foreign exchange savings, and GDP growth—suggest that the deal could have lasting macroeconomic benefits.

In sum, the new India–US trade agreement represents more than just a tariff adjustment. It signals a structural shift in economic engagement between the two countries. If projections hold true, India could significantly expand its export footprint in the US, strengthen its manufacturing base, and solidify its role in global supply chains. For policymakers, businesses, and farmers alike, the agreement marks a potentially pivotal moment in India’s evolving trade narrative.