US-India Trade Deal Nears Conclusion, But Russian Oil Purchases Remain a Hurdle

United States President Donald Trump announced that a long-negotiated bilateral trade agreement (BTA) with India is likely to be concluded soon, stating he has great respect for Prime Minister Narendra Modi.

Despite negotiators making significant progress and reaching consensus on most issues, the deal is held up by a few critical points requiring President Trump's approval. The main sticking point is India's ongoing procurement of oil from Russia.

The US has imposed tariffs on various Indian goods, with a significant portion being a penalty specifically for India's oil purchases from Russia. India has stated that for the BTA to be meaningful, these penalty tariffs must be fully rolled back.

While India is increasing its oil imports from the US and its Russian oil sourcing might decrease due to international sanctions on Russian companies like Rosneft and Lukoil, New Delhi maintains it will not finalize deals under pressure or deadlines.

Access for US agricultural products, such as soya and corn, into the Indian market is another area under negotiation.

Impact This news has a moderate impact on the Indian stock market. The finalization of a BTA could lead to increased trade volumes, potential tariff reductions on Indian exports to the US, and improved market access for both countries' goods. However, the unresolved issues, particularly related to Russian oil and retaliatory tariffs, create uncertainty. If the deal falters significantly or includes unfavorable terms for India regarding energy sourcing, it could negatively affect investor sentiment in sectors reliant on international trade and energy. A successful resolution could boost sectors like textiles, IT services, and pharmaceuticals through better market access, while also potentially increasing opportunities for Indian agricultural exports if market access is granted. The Russian oil issue is critical, as a forced rollback of tariffs linked to it could make the BTA less attractive for India. Rating: 7/10

Difficult Terms: Bilateral Trade Agreement (BTA): An agreement between two countries to promote trade and investment. Tariffs: Taxes imposed on imported or exported goods. Market Access: The ability for a country's products or services to be sold in another country's market. Sanctions: Penalties or restrictions imposed by countries on others for political reasons. Diktat: An order or command.