Context: India and the United States are closing in on a trade deal, Commerce Minister Piyush Goyal said on Tuesday, after two years of negotiations. India is seeking concessions for generic drugs it exports to the United States. The US, on its part, has been seeking more access for its farm goods, like almonds and apples, on which India had raised tariffs last year. The two nations have been negotiating a limited trade pact aimed also at restoring zero tariffs on a range of Indian exports to the United States under its Generalised System of Preferences (GSP), from which the Trump administration withdrew last year, citing lack of reciprocal access to Indian markets.
Key Fact

• According to the data of the commerce ministry, in 2019-20, the bilateral trade between the US and India stood at USD 88.75 billion, as against USD 87.96 billion in 2018-19. 
• The US is one of the few countries with which India have a trade surplus. The trade gap between the countries has increased to USD 17.42 billion in 2019-20 from USD 16.86 billion in 2018-19. In 2018-19, the US had surpassed China to become India's top trading partner.

Key Points of the deal

• This limited deal, unlike a more comprehensive free trade agreement, is likely to cover around 50-100 goods and services. 
• Discussions between the two countries have reportedly revolved around providing concessions to US farm products, dairy in particular, and on pricing of medical products such as stents, in return for the restoration of benefits extended to India under the generalised system of preferences (GSP), and market access for generic drugs. 
• For the US President, Donald Trump, a deal that provides American agricultural products with greater access to the India market, and is concluded before November, could bring benefits in the presidential elections. 
• For India, a trade deal, even though limited, if concluded, is a welcome sign, as it signals a reversal of the protectionist impulses emanating from government. 
• However, it must be mindful of not offering too many exceptions in order to secure the pact. Market access should be granted strategically, securing one’s own benefit.

Issues

• Moving from a limited agreement towards a comprehensive free trade agreement will prove to be a far more tricky proposition. 
• The US is likely to push for far greater access for its agricultural/dairy products than India will be prepared to offer — this was also a major sticking point in the RCEP negotiations. 
• Other thorny issues are likely to include intellectual property rights and digital taxation. On its part, the Indian government needs to develop a clear and coherent strategy on free trade agreements. 
• In the past, it has vacillated in its approach. While arguing for greater trade and integration with the global economy, it has walked out of the RCEP and called for reviewing the previously signed FTAs based on the notion that the country has not benefited from them. 
• And though a study by NITI Aayog has shown how Indian exporters had not gained from trade agreements according to the expectations, others have shown that much of India’s trade deficit stems from imports of raw materials, intermediate and capital goods, not consumer goods.
• Signals emanating from the government in the recent past — the decision to opt out of the RCEP, as well as the hikes in import duties — have suggested it is veering away from freer trade, towards a more inward-looking, protectionist stance. 

Suggestions

• The current global environment — the spread of the COVID-19 pandemic, and the increasing US-China altercations — provides an opportunity for reconfiguring trade relations. 
• While China continues to be central to global supply chains, and any re-adjustment will be time costuming and a costly affair in the short run, India must seize this moment.
• India is willing to work with an open mind, with a willingness to open markets with a corresponding opportunity for Indian businesses in the US.
• Both countries should also look for a preferential trade agreement (PTA) which can include 50-100 products and services. 
• "By enlarging industry and business wants to be left alone, wants the freedom to operate and is willing to commit itself to work within the framework of a country's laws.
• There is an opportunity and a trust deficit available globally and India is willing to fill that gap in the international supply chain as a trusted partner.

Road Ahead

• India-US relation remains critical for the shaping of world order in the 21st century. In order to realise the full potential of relations, the two governments must now strive to complete the unfinished agreements and set the course for a Comprehensive Strategic Global Partnership.