India-U.S. trade pact: Handicraft, other labour-intensive sectors to have safeguards: Commerce Ministry

The Ministry of Commerce and Industry has assured that labour-intensive sectors such as handicrafts will be safeguarded in the ongoing India–US bilateral trade agreement (BTA) negotiations, signalling potential relaxation of trade terms in these areas.

"On the part about handicrafts and other labour-intensive industries, I would like to assure you (that) there is a mutual recognition (between) both countries about India's labour-intensive sector, and how India's labour-intensive sector is not just something that is sensitive for India," said Sohag Sen, deputy secretary, Ministry of Commerce and Industry, on Wednesday.

During a panel discussion on “Reformulating Existing Trade and Investment, and Leveraging its Potential", organised by the PHD Chamber of Commerce and Industry, Sen added that the countries will ensure something that works to the mutual benefit of both countries.

In a February 13 India-U.S. joint statement, also referenced by Sen, the two countries had “pledged to collaborate to enhance bilateral trade by increasing U.S. exports of industrial goods to India and Indian exports of labour-intensive manufactured products to the United States.”

The two nations are expected to increase their share of agricultural goods trade in the ongoing BTA. According to GTRI, US exports of textiles and made-ups accounted for 51.3% of India’s total textile exports, worth $3,100.8 million.

India offers the U.S. a large consumer base.

Sen also noted that India’s large consumer base could be leveraged to market the country’s potential to the US administration and push for favourable trade terms. He added that negotiations are progressing positively, and there is excitement around the discussions.

"U.S. companies have a very large consumer base, and (some) also have a large presence in India, in terms of their R&D, which means India is a source not just of profits, but also of an environment that protects innovation that perhaps does not use U.S. companies as a way to help its domestic champions," Sen added, hinting at China.

Therefore, while labour-intensive Indian exports to the U.S. are likely to see some relief, discussions at the event suggested that the U.S. will benefit from tariff relaxations in sectors such as semiconductors, aviation, defence, and IT.

India has a huge potential for continuing to consume and purchase high-quality US exports in areas such as semiconductor innovation, aircraft and their parts, software, etc. There is immense possibility to have a balanced relationship between the two countries in both trade and investment, so that consumers in both countries get access to reliable and trusted suppliers,” Sen added.

Building domestic capabilities and innovation is key

Sen said that the traditional model of globalisation, focused solely on maximising return on equity, is no longer sufficient. Trade and investment decisions today are influenced by a wider set of factors—mutual trust between countries, strategic alignment, geopolitical considerations, and the interests of both consumers and citizens.

"We are living in interesting times, as Lenin would say, that there are decades in which nothing happens and there are weeks in which decades happen. We are in that, as far as trade and investment are concerned. But these are changes, or this churn in the global trade and investment framework, is not something that has happened all of a sudden. We are seeing the impacts in perhaps a certain manner, but these were in the works for quite some time," added Sen.

Asserting that the government has consistently prioritised trade alongside domestic reform and development through improved infrastructure and ease of doing business, Sen encouraged industry players to focus on domestic value addition and strengthening the local market.

"However, I would just have a few suggestions (for) industry representatives that, in the current world that we are living in, we perhaps would need to move beyond just return on equity or return on investment so industry will have to work more for enhancing domestic value addition and domestic manufacturing within India, not just for its benefit, but also because sensitivity and concerns around supply chain, security and supply chain resilience are increasingly becoming part of discussions amongst countries and reduction of over concentration in certain geographies is of mutual interest and a mutual concern for us and many of our partners," Sen added, hinting that not all aspects of the BTA with the U.S. will be smooth.

He also stressed the need for India to emerge not just as a stakeholder in the global value chain but also as a hub for innovation.

"We have to incorporate and inculcate that just relying on innovation from outside or innovation from other places, and us as only a [manufacturing hub] is perhaps not going to be the way anymore. We are a very innovative country, and therefore, we have to innovate. Industry and our innovation hubs have to go together," Sen said.

By when will the India-U.S. BTA be finalised?

Globally, India is increasingly entering into FTAs with key export partners. Agreements have already been concluded with Australia and the United Kingdom, while negotiations are ongoing with the European Union and the United States.

"Therefore, if you see, even before all of this discussion about reciprocal tariffs or other kinds of tariffs, both countries, in early February, when Prime Minister Modi visited Washington, decided to enter into negotiations for a bilateral trade agreement. So in this sense, the government kind of pre-empted and did not wait for circumstances to force it into any kind of action, but was proactive."

While Sen did not confirm whether the BTA will be finalised by June 25, industry experts at the event suggested that the first phase of the agreement may be formalised by July.

The impact of the U.S. tariffs on India will still be low compared to Asian peers.

During the panel discussion, experts also weighed in on the limited macroeconomic impact of India–U.S. trade tensions. Professor Rakesh Mohan Joshi, vice-chancellor of IIFT, noted that bilateral trade, though significant in volume, constitutes only a small portion of India’s GDP. He said that while exports may face some disruption due to the reciprocal tariffs of the U.S., the overall Indian economy is unlikely to be severely affected.

A chart presented during the session showed that India’s goods trade surplus with the U.S. in 2024 stands at $49 billion—lower than that of China ($319 billion), Mexico ($176 billion), and Vietnam ($88 billion)—with a relatively modest tariff differential of 2%. The figures reinforce the idea that India’s exposure is moderate compared to its peers.

Still, unease lingered in the room, tinged with sarcasm and anxiety, about the unpredictability of future trade policy shifts. Several speakers made light of the past volatility in U.S. trade actions. Highlighting this, Joshi remarked that earlier, no country was allowing even a 1% increase in tariffs from 3%, but now what Trump did was say, ‘I will impose more,’ so even 10% tariffs seem better.

Vishal Dhingra, co-chair of the Foreign Trade and Investment Committee, PHDCCI, emphasised the centrality of the US in India’s global trade equation. “The US is the largest market for India; we cannot ignore its presence. Other markets exist, but since 1991, all the rush happened because of the US." He added that this may be a corrective moment, perhaps the second reset since liberalisation, where nations must again work to understand each other’s needs.