What Happened
- India and the United States announced an interim bilateral trade agreement (BTA) framework on 7 February 2026, the most significant reset in bilateral trade relations in over a decade.
- India agreed to eliminate or reduce tariffs on a range of US food and agricultural products including dried distillers' grains (DDGS), red sorghum for animal feed, tree nuts (almonds, walnuts, pistachios), fresh and processed fruits, soybean oil, wine and spirits, and cranberries.
- Tariff reductions follow a structured approach: immediate duty elimination, phased elimination (up to 10 years), tariff reduction, margin of preference, and tariff rate quotas (TRQs) for highly sensitive items like in-shell almonds, walnuts, pistachios, and lentils.
- India explicitly excluded dairy products, spices, specific grains (rice, wheat), millets, sugar, oilseeds, pulses, poultry, meat, GM foods, fuel ethanol, and tobacco from the tariff reduction framework.
- Commerce Minister Piyush Goyal stated that agriculture and dairy are "completely protected" and that no concessions were made on sensitive farm and food products.
Static Topic Bridges
India's WTO Bound vs. Applied Agricultural Tariffs
India maintains one of the widest gaps between WTO-bound tariff rates and actually applied tariff rates among major economies. The average WTO-bound tariff for agricultural products in India is approximately 113.5%, while the trade-weighted average applied tariff stands at around 32.8%. This large gap gives India significant policy flexibility to adjust tariff protection for domestic producers without violating WTO commitments.
- WTO-bound agricultural tariff ceiling: ~113.5%
- Applied agricultural tariff (trade-weighted average): ~32.8%
- Most Favoured Nation (MFN) rate for agriculture: ~36.7%
- India can raise applied tariffs up to the bound rate without breaching WTO rules
- This "water in the tariff" provides India a buffer to protect sensitive farm products during trade negotiations
Connection to this news: The interim trade deal reduces applied tariffs on select agricultural products while keeping India well within its WTO-bound ceiling. The exclusion of rice, wheat, dairy, and pulses reflects India's use of this policy space to protect its most sensitive agricultural sectors while making targeted concessions on products where domestic supply is limited.
India's Edible Oil Import Dependence
India is the world's largest importer of edible oils, relying on imports to meet approximately 60% of its domestic consumption. In the marketing year 2024-25, India imported roughly 16 million tonnes of edible oils. Domestic production is projected at only 9.6 million tonnes in 2025-26 against total demand of approximately 26 million tonnes.
- Import composition (2025-26 projected): Palm oil 8-8.5 MT, soybean oil 5-5.5 MT, sunflower oil 2.8-3 MT
- Primary soybean oil sources: Argentina and Brazil
- Primary palm oil sources: Indonesia and Malaysia
- Domestic edible oil production meets only ~40% of total demand
- National Mission on Edible Oils (NMEO-Oil Palm) launched in 2021 to boost domestic production
Connection to this news: The reduction of tariffs on US soybean oil (previously at ~27.5% for crude, ~36% for refined) adds the US as a potential new source, diversifying India's edible oil import basket. However, this raises concerns among domestic oilseed farmers, particularly in Maharashtra, Madhya Pradesh, and Rajasthan, who fear price depression from cheaper imports.
India's Free Trade Agreement Architecture
India has steadily expanded its trade agreement network, maintaining preferential access arrangements with over 50 countries through various instruments: Preferential Trade Agreements (PTAs), Free Trade Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECAs), and Comprehensive Economic Partnership Agreements (CEPAs). India's first FTA was signed with Sri Lanka in 1998.
- Active FTAs as of 2025: 16+ agreements
- Recent agreements signed: India-UK CETA (July 2025), India-Oman CEPA (December 2025), India-New Zealand FTA (2025)
- EFTA TEPA entered into force 1 October 2025
- India has never had a comprehensive trade agreement with the United States prior to this interim framework
- The India-US deal is structured as an interim framework leading to a full Bilateral Trade Agreement (BTA) expected by late 2026 or 2027
Connection to this news: The interim trade agreement with the US represents a historic first in India-US trade relations, as no comprehensive bilateral trade deal has existed previously despite the US being India's largest trading partner. The phased approach (interim framework now, full BTA later) mirrors India's negotiating strategy seen in other recent agreements where sensitive sectors are addressed gradually.
Key Facts & Data
- India-US goods trade in 2024: $128.9 billion total ($41.5 billion US exports to India, $87.3 billion US imports from India)
- US goods trade deficit with India in 2024: $45.8 billion
- US reciprocal tariff on India reduced from 25% to 18% under the deal
- India committed to purchasing $500 billion worth of US energy, technology products, aircraft and parts, precious metals, and coal over five years
- Products excluded from tariff cuts: dairy, poultry, rice, wheat, millets, sugar, oilseeds, pulses, GM foods, meat, fuel ethanol, tobacco
- Products included for tariff reduction: DDGS, red sorghum, tree nuts, fresh/processed fruits, soybean oil, wine, spirits, cranberries
- India created 44 new tariff lines in Union Budget 2026-27 to track imports of products granted US market access (including pecan nuts, cranberries, blueberries)