What Happened
- Following the India-US interim trade deal, labour-intensive export sectors expect US tariff cuts to revive summer booking cycles and potentially double India's merchandise exports to the US within 4-5 years.
- Key beneficiary sectors include textiles, gems and jewellery, leather and footwear, agricultural goods, seafood, pharmaceuticals, electronics, and chemicals.
- Industry bodies anticipate that order diversions from China, Bangladesh, and Vietnam may accelerate as India becomes more cost-competitive under the new tariff regime.
- The immediate impact is expected in the form of increased summer bookings from US buyers for the upcoming season.
Static Topic Bridges
India-US Interim Trade Agreement and Tariff Structure
The India-US Interim Trade Agreement (February 2026) reduced the US reciprocal tariff on Indian goods from 25% to 18%, bringing India in line with most Asian competitors. Under the framework, India committed to reducing tariffs on all US industrial goods, agricultural products (including DDGs, sorghum, tree nuts, soybean oil), and to addressing non-tariff barriers. If successfully executed, the US would further remove tariffs on generic pharmaceuticals, precious gems, and aircraft parts. India-US bilateral merchandise trade was approximately USD 200 billion annually.
- US tariff on Indian goods: 25% → 18%
- India's commitments: eliminate/reduce tariffs on US industrial goods, agricultural products
- Phase 2 potential: tariff removal on Indian generics, precious gems, aircraft parts
- India-US bilateral merchandise trade: ~USD 200 billion
- India's exports to US: approximately USD 80-85 billion (FY25)
- Trade deficit: India runs a surplus with the US on goods
Connection to this news: The 7 percentage point tariff reduction (from 25% to 18%) directly improves the price competitiveness of Indian labour-intensive exports in the US market, particularly against competitors who face similar or higher tariff rates.
Labour-Intensive Export Sectors and India's Comparative Advantage
India's export basket includes several labour-intensive sectors where the country has a comparative advantage due to low wages, skilled artisan base, and abundant raw materials. The key sectors include textiles (USD 35-37 billion exports), gems and jewellery (USD 35-40 billion), leather (USD 5-6 billion), agricultural products (USD 50-53 billion), and pharmaceuticals (USD 27-28 billion). These sectors collectively employ over 10 crore people directly and are concentrated in specific geographical clusters.
- Textiles: Tiruppur (knitwear), Surat (synthetic), Ludhiana (hosiery), Bhilwara (fabrics)
- Gems and jewellery: Surat (diamond cutting), Mumbai (jewellery), Jaipur (coloured stones)
- Leather: Kanpur, Chennai, Agra, Kolkata
- Seafood: coastal states — Kerala, Gujarat, Andhra Pradesh, West Bengal
- Pharma: Hyderabad, Gujarat (API manufacturing hubs)
- Government support: PM MITRA parks, PLI scheme (textiles, pharma, electronics), APEDA for agricultural exports
Connection to this news: The tariff reduction is particularly impactful for labour-intensive sectors because these products compete primarily on price. A 7% tariff reduction can translate to a 5-10% improvement in landed cost, which in global procurement decisions often determines order placement.
India's Export Promotion Infrastructure and Initiatives
India's export promotion ecosystem includes the Foreign Trade Policy (FTP) 2023, which replaced the earlier five-year cycle with a dynamic, responsive framework. Key initiatives include Remission of Duties and Taxes on Exported Products (RoDTEP), the Districts as Export Hubs (DEH) initiative identifying export-worthy products for each of India's 766 districts, and the One District One Product (ODOP) programme. Special Economic Zones (SEZs) — now being reformed under the Development of Enterprise and Service Hubs (DESH) Bill framework — provide tax and duty incentives for export-oriented production.
- Foreign Trade Policy 2023: open-ended, dynamic (replaced five-year cycle)
- RoDTEP: replaced MEIS; remits embedded duties/taxes on exports
- Districts as Export Hubs: 766 districts mapped with export-worthy products
- SEZs: ~268 operational (DESH Bill to replace SEZ framework)
- APEDA (agricultural exports), EPC (commodity-wise export promotion councils)
- India's merchandise exports target: USD 2 trillion by 2030
Connection to this news: The trade deal's tariff relief combined with domestic export promotion infrastructure (RoDTEP, ODOP, DEH) creates a compounding effect — lower tariffs at the destination end, and reduced input costs at the origin end.
Key Facts & Data
- US tariff on Indian goods: reduced from 25% to 18%
- Export doubling timeline: 4-5 years
- Key beneficiary sectors: textiles, gems, leather, agricultural goods, seafood, pharma, electronics, chemicals
- India's exports to US: approximately USD 80-85 billion (FY25)
- Textile sector employment: ~4.5 crore people
- India's total merchandise exports: approximately USD 437 billion (FY25)
- Foreign Trade Policy 2023: open-ended, dynamic framework
- RoDTEP: replaces MEIS for duty/tax remission on exports