What Happened
- The interim trade agreement between India and the US will include India's energy requirements, covering crude oil, LNG, and LPG imports.
- India and the US have agreed to work toward increasing bilateral trade to $500 billion by 2030, with energy forming a major component.
- India's energy demand is rising at approximately 7% annually, and diversifying suppliers is expected to help secure crude oil at more competitive prices.
- Under the ITA framework, the US will reduce tariffs on Indian goods from 50% (previously 25% reciprocal + 25% Russia-related) to 18%.
- India will eliminate or reduce duties on US industrial goods and agricultural products.
- The agreement also covers coking coal (India imports approximately Rs 1.5 lakh crore worth annually), advanced technology, and IT equipment.
Static Topic Bridges
India's Energy Import Strategy and Supplier Diversification
India is the world's third-largest energy consumer and third-largest crude oil importer, with import dependency at approximately 89% for crude oil and approximately 50% for natural gas. India's traditional oil suppliers have been Middle Eastern producers (Saudi Arabia, Iraq, UAE, Kuwait), but the supplier landscape shifted dramatically after 2022 when discounted Russian crude surged to approximately 34% of India's imports. The India-US ITA signals a rebalancing toward US energy, which could include shale oil, LNG from the Gulf of Mexico, and LPG.
- India's crude oil import: approximately 4.7-5 million bpd; import bill: approximately $140 billion (2024-25)
- India's LNG imports: approximately 35 billion cubic metres (2024-25); major suppliers: Qatar, US, UAE, Australia
- US LNG exports to India: growing rapidly; Sabine Pass and Freeport LNG terminals are key sources
- India's natural gas demand: approximately 60 billion cubic metres (BCM); domestic production: approximately 30 BCM
- India's energy import bill (total): approximately $200 billion (2024-25); single largest import category
- Strategic diversification: India Energy Week vision targets 10% reduction in import dependency by 2030
Connection to this news: Including energy in the ITA framework serves India's strategic interest in supplier diversification (reducing over-reliance on any single source), while giving the US a large and growing export market for its shale oil and LNG production.
India-US Trade Relations -- From GSP Withdrawal to ITA Framework
India-US trade relations have evolved through phases of tension and cooperation. The US withdrew India's Generalised System of Preferences (GSP) status in June 2019, affecting approximately $6.3 billion of Indian exports that had enjoyed duty-free access. Contentious issues included India's price caps on medical devices, data localisation requirements, e-commerce FDI restrictions, and dairy/agricultural market access. The ITA framework represents the most significant bilateral trade breakthrough, with reciprocal tariff reductions and a $500 billion trade target.
- India-US bilateral trade (2023-24): approximately $191 billion (goods + services)
- US GSP withdrawal: June 5, 2019; affected 1,937 Indian product lines
- US tariffs on Indian goods: varied; reciprocal tariff of 25% imposed; now reduced to 18% under ITA
- India's tariffs on US goods: average applied tariff approximately 17% (WTO data); higher on agriculture
- Key trade irritants: dairy market access, e-commerce FDI norms, data localisation, IP protection, medical device pricing
- Defence trade: India-US defence trade grew from near zero (2008) to over $24 billion in signed agreements
Connection to this news: The ITA marks a strategic shift from adversarial trade dynamics (GSP withdrawal, tariff escalation) to a cooperative framework where energy trade serves as a foundation for broader economic engagement.
Coking Coal -- Strategic Import for India's Steel Ambitions
India is the world's second-largest crude steel producer (approximately 140 million tonnes annually) and aims to double production to 300 million tonnes by 2030 under the National Steel Policy 2017. Coking coal (metallurgical coal) is an essential input for blast furnace steelmaking, and India imports approximately 57 million tonnes annually, as domestic coking coal production is limited and of lower quality. Current imports are worth approximately Rs 1.5 lakh crore, primarily from Australia (approximately 70%), with the US, Mozambique, and Russia as secondary sources.
- India's steel production: approximately 140 million tonnes (2024-25); target: 300 million tonnes by 2030
- National Steel Policy 2017: per capita steel consumption target of 160 kg (from approximately 86 kg currently)
- Coking coal imports: approximately 57 million tonnes; approximately 85% of total requirement
- Major coking coal suppliers: Australia (approximately 70%), US, Mozambique, Russia, Canada
- India's domestic coking coal: limited to Jharia coalfield (Jharkhand); higher ash content than imports
- PLI Scheme for Speciality Steel: Rs 6,322 crore for high-grade steel production
Connection to this news: Including coking coal in the India-US ITA diversifies India's coking coal sourcing away from heavy dependence on Australia, while supporting India's steel production ambitions at potentially competitive prices.
Key Facts & Data
- India-US bilateral trade target: $500 billion by 2030
- India's energy demand growth: approximately 7% annually
- US tariff on Indian goods: reduced from 50% to 18% under ITA framework
- India's crude oil import dependency: approximately 89%
- India's coking coal imports: approximately 57 million tonnes annually worth Rs 1.5 lakh crore
- India's steel production: approximately 140 million tonnes; target 300 million tonnes by 2030
- India's IT exports: approximately $200 billion; potential increase to Rs 45 lakh crore with US tech access