According to the Office of the US Trade Representative (USTR), total goods trade between India and the US was $129 billion as of calendar 2024. That includes $87 billion of Indian exports to the US and $42 billion of Indian imports from the US. That is a goods trade surplus of $45 billion for India. On the services trade, Indias’s imports and export of services to the US are to the tune of $41.5 billion approximately. Hence, the services trade is almost in balance. The huge trade surplus that India enjoys with the US is more on the goods front. Clearly, that is what has been rankling Trump and he is trying to use the Indo-US trade deal to narrow the US deficit to the extent possible. 

That is the catch. The $500 billion figure is not where the trade between the two countries is likely to reach. That is the goods import commitment that India has given to the US over the next 5 years. Assuming an average of $100 billion of imports a year, we are still looking at a 2.5X increase in imports from current levels. What does India get in return? India gets unfettered low-tariff access to the US markets. According to Piyush Goyal, that is a $30 trillion market for the taking.  However, there is only a commitment for goods imports from the US. India will have to increase its exports to the US by, at least, 25% from current level to achieve neutral trade balance with the US. 

Indian exports to the US are predominantly products like textiles, gems & jewellery, marine products, petroleum products, chemicals etc. India also exports electronic products like mobile phones, but they have a very large import component to it. On the other hand, India’s imports from the US include petroleum, electronics, pharmaceuticals, and aircraft. Going ahead, India is likely to run up a huge import bill from high technology items like aircraft, high-end electronics, and AI chips. India has committed to buy Boeing aircraft worth $100 billion over the next five years, which makes up 20% of the total imports over this period. It is time for more clarity on these matters. 

The bigger risk that India runs from the Indo-US trade deal is the heavy dollarization of imports. One can only imagine the impact of $100 billion of annual goods imports from the US, denominated in dollars, on Indian rupee. The other concern is the extent to which India will have to open up the agriculture and dairy sector to the American multinational giants. The US has been demanding that for quite some time. The bottom line is that, at this juncture, we need a lot more clarity on the finer details of the trade deal. An import commitment of $500 billion is intimidating, even if it is over 5 years. The big question is whether Indian exports have the firepower to match?