PM Modi may sign trade deal during upcoming US visit to resolve issues

Modi will be visiting Houston, Texas, and New York as part of a six-day trip from September 21 to 27

A mutually acceptable “trade package” is expected to be signed between India and the United States (US) during Prime Minister Narendra Modi’s upcoming trip to the US later this week.

Modi will be visiting Houston, Texas, and New York as part of a six-day trip from September 21 to 27. Apart from a planned address to the United Nations, a resolution to pending trade issues is expected to be the high point in foreign policy goals, senior officials said.

The package has been in the works for more than a year and trade officials have met as many as six times to try and hammer out a deal that provides an amicable solution to grouses from both sides. India is considering the dismantling of its current price cap regime for coronary stents with a trade margin policy. It may also allow lower duties on import of certain information and communication technologies products such as high-end mobile phone and smart watches from the US that may make iPhone products cheaper in the country, commerce department officials said.

In return, the US would step back from its aggressive posturing on “reciprocal taxes” on Indian goods. Trump has repeatedly accused India of being a “high tariff nation”, referring to duties placed on Harley-Davidson motorcycles.

“While the US would fall foul of the World Trade Organization norms if it imposes a ‘reciprocal tax’ against India, it would undo all the discussions so far. We would have to protect our exporters,” a senior official added. Also, since some of the proposals have met with significant opposition from the domestic industry, any possibility of reciprocal taxes on India would stop trade talks, another official added.

Talks had run the risk of coming apart earlier this year, after the US had cut off India’s duty-free access to the American market under its largest preferential trade scheme, the Generalised System of Preferences. Subsequently, India had raised import duties on key high value products from the US, mostly apples and almonds.

A promise to ramp up the purchase of crude oil from Texas, a key US demand, will be made by India. In 2017, India got its first consignment of crude oil from the US, 42 years after Washington DC stopped oil exports in 1975. Indian Oil Corporation and Bharat Petroleum had placed orders for over 2 million barrels from the US, which was pegged to boost bilateral trade by $2 billion.

Sources say the US had also asked India to confirm the current economic slowdown and the turmoil in the domestic aviation sector will not affect civilian aircraft purchases by India. Low-cost carrier SpiceJet itself has ordered 205 aircraft from US manufacturer Boeing.

However, the government will not be focusing on the reinstatement of GSP benefits, which have lapsed and the government will not actively petition the US to change its position, a senior official said.