US leverage, India’s limited options: Why is the trade deal taking so long?

The United States Trade Representative (USTR) Jamieson Greer announced on October 1 that the trade deal talks between India and the US are in their final phase, though the signing of the deal remains "not imminent". Both countries are reportedly working to resolve "sticking points". This unexpected statement came as India had previously agreed to a framework agreement in February.

Indian Commerce and Industry Ministry officials maintain that a deal has already been reached, and India was reportedly awaiting better tariff rates before signing.

Despite Greer's comments, the US and India have differing expectations from the deal. India aims to purchase $500 billion worth of US products over the next five years, while the US has not committed to purchasing Indian goods. Furthermore, India had agreed to remove an additional 25% tariff on imports from the US in recognition of its commitment to stop purchasing Russian oil. However, the recent US Russia sanctions law has sent mixed signals to India.

The US has also imposed investigation under Section 301 of the Trade Act of 1974, which could bolster American companies against India's excess industrial capacity. This added uncertainty is making Indian exporters cautious, deterring bulk orders from US buyers. Despite agreeing to strengthen economic security alignment, experts warn that India's sovereignty on foreign policy and trade might be substantially curtailed by similar provisions in other agreements.

US demands have gone beyond trade and digital trade, with the State Department raising concerns about India's Foreign Exchange Management Act (FEMA) and its high effective tax burden on foreign banks.