India-US Trade Deal: India will get more profit or loss from Trump’s trade deal, understand the mathematics

Finally, the trade deal that everyone was waiting for has happened. Announcing the much-awaited trade deal with India on his social media platform Truth Social, US President Donald Trump said that India has agreed not to buy oil from Russia, hence the tariff penalty imposed on India is removed and also the tariff which was 25 percent has now been reduced to 18 percent.

Trump has also said that this deal has been reached after a phone conversation with Prime Minister Narendra Modi and it is implemented with immediate effect. But the question is what are the terms of this deal. Has India really benefited from this deal? After all, what was the issue due to which this deal was stalled and now what happened that Trump agreed to make a deal with India, today there will be a clear cut discussion on this issue.

Let us first talk about the conditions set by US President Trump regarding this deal. So the condition is that

• India will purchase more than $500 billion of energy, technology, agricultural products, coal and other goods from America.
• India will now stop purchasing Russian oil and will instead buy more oil and energy from Venezuela.
• India will move towards reducing its tariff and non-tariff barriers on American goods to zero.
• India will now buy American goods at a higher level.

The question remains that what was the issue due to which this deal was stalled and now what happened that Trump agreed to make a deal with India, then there are two-three possible reasons for it.

1. The first reason is the purchase of oil from Russia. Trump wanted India not to buy oil from Russia, whereas India used to buy oil from Russia and still does. India has not yet officially refused to buy oil from Russia, but Trump feels that India has stopped buying oil from Russia, so he finalized the deal.
2. The second reason is India’s lack of agreement on agricultural products. Under the trade deal, Trump wanted India to buy dairy products from America, which also included animal feed. Meat was mixed in America’s fodder, due to which India was opposing that fodder. And the deal was stuck. Even now it has not been made clear from India whether there is agreement or disagreement on that fodder, but Trump feels that India has agreed to the purchase.
3. The third reason is Prime Minister Narendra Modi’s call. US Commerce Minister Howard Lutnick had recently claimed that the India-US trade deal could not be done because PM Narendra Modi did not call Donald Trump at the last moment. Then Lutnik had also claimed that everything was ready, but PM Modi did not call, due to which the deal was stopped. Then the Indian government had rejected this claim. And now Trump himself has said that he had a phone conversation with Prime Minister Narendra Modi, after which the deal was finalized, but it is still not clear who made the call, Prime Minister Narendra Modi or US President Trump.

Nevertheless, India has welcomed this deal. Prime Minister Narendra Modi himself has reacted to this trade deal and posted on social media and wrote, ‘It was a great pleasure to talk to my dear friend President Trump. I am happy that now the tariff on Made in India products will be reduced to 18%. On behalf of the 1.4 billion people of India, many thanks to President Trump for this wonderful announcement.

In the tweet made on this deal, Prime Minister Modi has further written, ‘When two big economies and the world’s largest democracies work together, it benefits our people and opens up immense opportunities for beneficial cooperation. President Trump’s leadership is extremely important for world peace, stability and prosperity. India fully supports his efforts for peace. I look forward to working closely with them to take our partnership to unprecedented heights.

Now the real question is, what is India going to benefit from this deal or what are the benefits, then understand that also, then we will definitely talk about the losses also. So first let’s talk about benefits. India’s advantage is that

• America has increased the tariff on India to 18 percent. Due to this, the impact on India’s American exports will be less. India will now be able to sell more goods to America, whereas China, Bangladesh and Vietnam who sell goods to America have higher tariffs than India, so American consumers will be more interested in Indian goods.
• Many sectors of India, such as textiles, engineering goods, IT, auto parts, gems-jewellery and pharma sectors will directly benefit. If exports in these areas increase due to reduction in tariffs, new employment opportunities will also be created in India.
• Due to the finalization of the trade deal, the uncertainty that existed in the relations between America and India will end. And because of this foreign investors will be able to invest in India. Especially the confidence of American investors will increase and they will invest money in India, because recently their confidence was shaken due to the sourness in the relations between India and America.
• India’s dominance in Asia will increase and so will trade with America, because while the tariff on India is 18 percent, the tariff on Pakistan is 19 percent and the tariff on Bangladesh is 20 percent. Malaysia, Cambodia and Thailand also have higher tariffs than India and they are 19 percent, while Vietnam has 20 percent. The highest tariff in Asia is on China, which is currently 37 percent. If we talk about the world, then the highest tariff of 50 percent is on Brazil and then 40-40 percent tariff is on Myanmar and Laos. So in this matter India has only advantage.
• The stock market has the fastest reaction to any deal or any decision and after the announcement of this deal the stock market is completely on the rise. The stormy rise of Sensex and Nifty is enough to show that India is going to get huge benefits from this deal. At the same time, the rupee is also rising, which is enough to show the benefits of this deal. The rupee, which had closed at 91.50 on February 2, reached 90.30 on February 3 after the deal and Bloomberg’s report says that this is the biggest one-day gain in the rupee since 2021. Market analysts believe that the rupee may strengthen further and reach the level of 89.50 to 89.00 in the coming weeks.

While there are so many advantages, there are also some disadvantages and that loss can also be big, on which there is no reaction from the government at present. However, the government has also given clarification on this matter and said that India will not suffer any loss. So what will be the loss? The loss will be that

• India used to buy cheap oil from Russia. Now it will have to buy expensive oil from America and Venezuela. If oil purchase becomes expensive then the people of India will also get expensive oil.
• India sells dairy products to other countries of the world, but if Trump has talked about a deal in dairy products also, then Indian farmers may have to face tough competition from American dairy and poultry products.
• Agriculture has also been discussed in the deal. America is a producer of soybean and maize and its goods are cheaper than India. If America sells its goods to India, which is part of the deal, then the challenge for Indian farmers will become bigger and the farmers who are already facing problems will face even more problems.
• India’s trade with America has been a trade surplus. That means India was selling more goods to America and buying less. Under the agreement, India will have to reduce its tariffs on American goods to zero, which will pose a challenge to domestic industries as they will not get fair prices for their goods.

In such a situation, India is benefiting from this deal but the loss is also not less. Moody’s has clearly said in its comment that completely switching to non-Russian oil could further tighten the global supply, which would lead to higher prices and there would be a risk of inflation in a big importing country like India. The agency said India is unlikely to immediately stop all Russian purchases to avoid disruption to economic growth. However, an even bigger loss seems to be happening to Indian farmers, dairy farmers and poultry farm owners and these are the people, to save their losses, India was not only postponing this deal for so long but also did not budge even after the imposition of 50 per cent tariff. Now Trump himself has told all the details and conditions of this deal. Whatever statement will be made by India on this deal or whatever conditions will be revealed, it will again be a clear cut matter.