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India-US interim trade pact likely to be operationalised in April: Goyal

February 20, 2026 4 min read International Relations Economics GS2 GS3
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What Happened

  • Commerce and Industry Minister Piyush Goyal announced that the India-US interim trade agreement is likely to be signed in March and operationalised from April 2026.
  • The legal text of the agreement will be finalised during a three-day meeting of Indian and American officials beginning February 23 in the US.
  • The interim agreement is the first phase of a broader Bilateral Trade Agreement (BTA) that aims to achieve bilateral trade of $500 billion by 2030.
  • The US has already reduced the reciprocal tariff on Indian goods from 25% to 18%, while rescinding the 25% punitive tariff imposed over India's Russian oil purchases.
  • Minister Goyal also indicated that India's FTAs with the UK and Oman are likely to be implemented in April, while the India-New Zealand pact is expected in September 2026.

Static Topic Bridges

India's Trade Agreement Architecture

India has historically been cautious about entering free trade agreements, having exited RCEP in 2019 and renegotiated terms of several existing FTAs. The current government has adopted a more proactive approach, pursuing multiple trade agreements simultaneously across different formats including comprehensive FTAs, interim agreements, and sector-specific deals.

  • India has existing FTAs with ASEAN, South Korea, Japan, Sri Lanka, and several other countries.
  • The India-UAE Comprehensive Economic Partnership Agreement (CEPA), signed in 2022, was the first major FTA India concluded after a gap of nearly a decade.
  • India is simultaneously negotiating trade agreements with the EU, Canada, the UK, and now the US, reflecting a "360-degree" trade engagement strategy.
  • The India-Australia Economic Cooperation and Trade Agreement (ECTA) was implemented in 2022.
  • The phased approach (interim first, comprehensive later) used with the US mirrors the approach adopted with Australia.

Connection to this news: The April operationalisation timeline for the US interim trade pact, alongside simultaneous UK and Oman FTA implementation, signals an unprecedented acceleration of India's trade liberalisation agenda, with multiple major agreements becoming effective within the same quarter.

Trade Deficit Management and Export Competitiveness

India has traditionally run trade deficits with many of its FTA partners, leading to domestic criticism that FTAs primarily benefit import-oriented economies. The government has addressed this concern by designing newer agreements with safeguard mechanisms, rules of origin provisions, and sector-specific carve-outs.

  • India's trade deficit with ASEAN widened after the India-ASEAN FTA (2010), particularly with countries like Vietnam and Indonesia.
  • India's merchandise trade deficit stood at approximately $245 billion in FY 2024-25.
  • India maintains a trade surplus of $41.18 billion with the US, making the US a favourable FTA partner from a deficit management perspective.
  • The interim agreement with the US focuses on sectors where India has competitive advantage (IT services, pharmaceuticals, textiles) while gradually opening sectors where the US has comparative advantage (agriculture, energy, defence equipment).

Connection to this news: The India-US interim trade deal is strategically different from previous FTAs because India already runs a surplus with the US, reducing the political risk of the agreement being criticised as one-sided.

Most Favoured Nation (MFN) Principle and Bilateral Trade Deals

Under WTO rules, the Most Favoured Nation (MFN) principle requires that any trade advantage given to one country must be extended to all WTO members. FTAs and preferential trade agreements are permitted exceptions under Article XXIV of GATT, provided they cover "substantially all trade" and do not raise barriers to non-members.

  • India's MFN applied tariff rate averages approximately 17-18%, one of the highest among major economies.
  • The US reciprocal tariff of 18% on India (reduced from 25%) operates outside the WTO framework, imposed under IEEPA (International Emergency Economic Powers Act).
  • The interim agreement aims to bring bilateral tariffs below MFN rates for both countries, creating preferential market access.
  • The agreement must be notified to the WTO, though interim agreements have less stringent notification requirements than full FTAs.

Connection to this news: The interim agreement structure allows both countries to provide immediate tariff relief without waiting for the comprehensive BTA to satisfy WTO Article XXIV requirements, enabling faster implementation by April.

Key Facts & Data

  • Expected signing: March 2026; operationalisation: April 2026.
  • US reciprocal tariff: reduced from 25% to 18% on Indian goods.
  • India-US bilateral trade target: $500 billion by 2030.
  • Current bilateral trade: $131.84 billion in FY 2024-25.
  • India's trade surplus with US: $41.18 billion.
  • India-UK FTA: implementation expected April 2026.
  • India-Oman FTA: implementation expected April 2026.
  • India-New Zealand FTA: implementation expected September 2026.