Ans. India is leveraging the temporary suspension of reciprocal tariffs by the United States to finalize an interim trade agreement. With a 90-day window available before the re-imposition of 26% US tariffs, India aims to advance its trade relations through a mutually beneficial and expedited trade deal. This is a significant step within India’s broader trade strategy, which includes parallel negotiations with the EU and UK as well.

Strategic Importance of the Interim Trade Agreement

1. Strengthening Bilateral Trade Ties

India and the US share a comprehensive global strategic partnership, and enhanced trade ties will strengthen this multifaceted relationship.
The interim deal can serve as a foundation for a full-fledged Free Trade Agreement (FTA) in the future.

2. Time-Bound Opportunity for Economic Gains

The 90-day suspension of US reciprocal tariffs offers a time-sensitive opportunity to conclude a beneficial agreement.
India's trade team is optimistic that a win-win interim arrangement can be finalized within this period.

3. Proactive Diplomacy and Leadership Intervention

The Terms of Reference (ToR) for the bilateral trade agreement were finalized with high-level intervention from the Prime Minister’s Office (PMO), indicating strong political will.
This reflects India’s intent to proactively shape its trade outcomes and secure early benefits.

4. Geopolitical Leverage Amid Global Trade Re-alignments

Amid growing trade tensions and supply chain disruptions, India seeks to position itself as a reliable trade partner to the US and the Western world.
It is a part of India's strategy to diversify trade partners and reduce overdependence on a few markets.

5. Push for Parallel Agreements with Other Key Partners

India is also in advanced negotiations for trade agreements with the European Union and the United Kingdom.
However, challenges like the EU's carbon tax and non-tariff barriers (linked to climate policies) have created friction.
Minister Piyush Goyal has raised concerns that these measures disproportionately impact developing economies like India.

6. Defending Developing Country Interests

India has emphasized that while developed nations pursue aggressive climate goals, developing countries need time, support, and flexibility.
This position aligns with India’s commitment to equity, climate justice, and inclusive development in trade policies.

7. Commitment to Multilateralism and WTO Reforms

India continues to advocate for a rules-based multilateral trading system.
It seeks WTO reforms regarding:
1. The definition of “developing countries”
2. E-commerce regulations
3. Agricultural subsidies
4. Fisheries subsidies
These efforts underline India's dual approach: engaging in bilateral negotiations while simultaneously championing multilateral reforms.

The interim trade agreement with the United States holds significant strategic and economic importance for India. It provides an immediate avenue to deepen bilateral ties, reduce tariff-related uncertainty, and set the stage for a long-term comprehensive agreement. Following the discussions between Prime Minister Narendra Modi and President Trump, both nations agreed to aim for concluding the first tranche of the Bilateral Trade Agreement by autumn 2025. This step not only strengthens India-US relations but also reaffirms India’s role as a key player in global trade diplomacy.

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