What Happened
- India and the US have not negotiated a chapter on digital trade in the interim trade pact announced on 6 February 2026.
- The digital trade chapter will be taken up as part of the comprehensive Bilateral Trade Agreement (BTA) negotiations.
- Despite excluding a full digital trade chapter, both countries committed to address discriminatory or burdensome practices and barriers to digital trade.
- Both sides agreed to set a clear pathway for robust, ambitious, and mutually beneficial digital trade rules within the BTA framework.
- The BTA negotiations were launched by President Trump and PM Modi on 13 February 2025 and will include additional market access commitments and supply chain resilience provisions.
Static Topic Bridges
India's Digital Trade Policy and Data Sovereignty Concerns
India has adopted a cautious stance on digital trade rules in international agreements, driven by concerns over data sovereignty, digital taxation rights, and the dominance of US-based technology companies. India has pursued data localisation requirements, opposed the WTO moratorium on customs duties on electronic transmissions, and refrained from joining digital trade negotiations at multilateral forums.
- RBI mandated payment data localisation (2018): all payment service providers must store data related to Indian electronic payments locally
- Digital Personal Data Protection Act, 2023 (DPDPA): India's comprehensive data protection law; draft rules released January 2025
- India opposed extension of WTO customs duty moratorium on electronic transmissions — the moratorium expires at MC14 or 31 March 2026, whichever is earlier
- India did not join the Joint Statement Initiative (JSI) on E-Commerce at the WTO (launched 2019)
- The US has identified India's data localisation requirements as a key trade barrier
- India's digital economy is valued at approximately $1 trillion and is projected to reach $5 trillion by 2030
- India's IT services exports: approximately $200 billion annually (2024-25)
Connection to this news: India's decision to defer the digital trade chapter to the comprehensive BTA reflects its strategy of negotiating digital trade rules carefully, protecting its policy space on data localisation and digital taxation while maintaining leverage over US tech companies operating in India.
WTO E-Commerce Moratorium and Customs Duties on Electronic Transmissions
The WTO moratorium on customs duties on electronic transmissions has been in place since 1998, renewed periodically at Ministerial Conferences. The moratorium prevents WTO members from imposing customs duties on digital content transmitted electronically (software, e-books, music, films, data). India and South Africa have led opposition to extending the moratorium, arguing that developing countries lose customs revenue and digital taxation policy space.
- Moratorium first adopted: WTO Second Ministerial Conference, Geneva (1998)
- Current expiry: MC14 or 31 March 2026, whichever is earlier
- India's estimated revenue loss from the moratorium: $500 million to $3.8 billion annually (UNCTAD estimates vary)
- India's argument: developing countries are net importers of digital content and lose tariff revenue
- US/EU argument: duties would increase costs, fragment the digital economy, and harm SMEs
- The moratorium covers only customs duties, not internal taxes (GST, income tax, equalisation levy)
- India introduced the Equalisation Levy (2% on non-resident e-commerce operators) in 2020 as a digital tax, later withdrawn in 2024 as part of the OECD Pillar One framework negotiations
Connection to this news: By excluding digital trade from the interim pact, India preserves its flexibility on the WTO e-commerce moratorium — if the moratorium lapses at MC14, India could potentially impose customs duties on digital imports, a position it would not want to compromise through a bilateral commitment to the US.
Bilateral Trade Agreement (BTA) vs Interim Trade Agreement
The India-US trade relationship has evolved through multiple frameworks: the Trade Policy Forum (TPF), the Strategic Trade Dialogue, and now the BTA. The interim agreement signed in February 2026 covers tariff reductions and market access as a first step, while the comprehensive BTA will address deeper issues including digital trade, investment, intellectual property, and regulatory coherence.
- India-US bilateral trade (2024-25): approximately $190 billion
- US is India's largest trading partner (surpassed China)
- India's trade surplus with the US: approximately $35-40 billion (a key point of US concern)
- The interim agreement reduces US tariffs on Indian goods to 18% (from 50%)
- India committed to $500 billion in US purchases over 5 years
- BTA will cover: digital trade, labour standards, environmental provisions, government procurement, IP, and investment
- Previous India-US trade friction: GSP withdrawal (2019), Section 232 tariffs on steel and aluminium, retaliatory tariffs
- India-US Trade Policy Forum (TPF): established 2005, serves as the main bilateral trade dialogue platform
Connection to this news: The deliberate sequencing — interim agreement first, BTA later — allows India to secure immediate tariff relief and export gains while preserving negotiating leverage on sensitive areas like digital trade, data localisation, and e-commerce regulations that have significant implications for India's digital economy ambitions.
Key Facts & Data
- India-US interim trade pact announced: 6 February 2026
- Digital trade chapter: excluded from interim pact, deferred to BTA
- BTA negotiations launched: 13 February 2025 (Trump-Modi)
- India-US bilateral trade: ~$190 billion (2024-25)
- India's IT services exports: ~$200 billion annually
- WTO e-commerce moratorium: in place since 1998, expires MC14 or 31 March 2026
- India's estimated revenue loss from moratorium: $500 million-$3.8 billion annually
- Digital Personal Data Protection Act: 2023
- Equalisation Levy (2% on non-resident e-commerce): introduced 2020, withdrawn 2024
- India's digital economy value: ~$1 trillion (projected $5 trillion by 2030)
- US tariff on Indian goods under interim deal: 18%