Tariffs, tailwinds & trade talk: India bets on a US deal to turbocharge exports

The finance ministry said a successful India-US trade deal could “flip current headwinds into tailwinds,” opening up access to new markets and bolstering exports.

The ministry flagged potential trade barriers in the wake of the additional 26% tariffs proposed by the US as a “key external vulnerability” in its monthly economic review for April that was issued on Tuesday.

Private capital expenditure could lag, with firms adopting a more cautious stance amid global uncertainty and tighter financial conditions, it said, underscoring importance of a balanced trade agreement with the US.

Commerce and industry minister Piyush Goyal recently met US commerce secretary Howard Lutnick in Washington DC, their second meeting within a week, to carry forward negotiations on a trade deal.

Some experts expect the accord to be in place by early July, before expiry of the 90-day pause on tariffs that US President Donald Trump announced in April. The US remained India's top trading partner for a fourth straight year.

Growth Momentum

Bilateral goods trade amounted to $132 billion in FY25. India had a merchandise trade surplus of $41 billion with the US last fiscal year.

The Indian economy remains resilient, the ministry stressed, with FY26 growth possibly hitting the upper end of the 6.3-6.8% range projected in February’s Economic Survey. Although the International Monetary Fund (IMF) has projected India’s FY26 growth rate at 6.2%, others have pegged it at 6.3-6.7%.

Sustained government capital expenditure, income tax relief unveiled in the February budget and interest rate cuts by the central bank will likely stimulate consumption and investment further, aiding growth amid easing inflation, the finance ministry said in its review.

The economy is marked by robust domestic fundamentals, prudent macroeconomic management, and a capacity to withstand external shocks, according to the finance ministry document. “Strong private consumption, especially the rural rebound, and robust services exports remain the primary engines of growth,” it said.

The services sector remains firmly in the expansionary zone, offsetting some of the softness in merchandise exports. The rupee has remained relatively stable, and foreign exchange reserves continue to provide a cushion against external shocks, the ministry said in the review