US President Donald Trump has reduced tariffs on Indian goods after months of uncertainty. Following a conversation with Prime Minister Narendra Modi, tariffs were lowered from 25 percent to 18 percent.
However, the deal comes with conditions. India has agreed to stop buying crude oil from Russia. Instead, it will increase purchases of goods and oil from the United States.
After diplomatic discussions, Prime Minister Modi also agreed to buy products worth Rs 500 billion in the future. This commitment forms a key part of the revised trade understanding between the two countries.
Another major takeaway is the reduction from earlier 50 percent tariffs. India will lower trade barriers and purchase oil from the US and possibly Venezuela going forward.
Donald Trump announced the decision on social media. He said the tariff cut was made out of friendship and respect for Prime Minister Modi and took effect immediately.
Responding to the announcement, Prime Minister Modi thanked President Trump on X. He expressed gratitude on behalf of 1.14 billion people of India for the decision.
While the move places India on par with several South East Asian nations, economic analysts remain cautious. They believe it is still unclear whether this is a full trade deal or only a tariff adjustment.
In August last year, Trump had doubled duties on Indian imports to 50 percent. The move was aimed at pressuring India to stop purchasing Russian oil.
The latest development follows months of tense negotiations between the two democracies. This time, India appears more prepared and focused on reducing risks and diversifying trade partners.
The deal also comes shortly after India signed a free trade agreement with the European Union. That agreement took nearly two decades to finalise.
After the new arrangement, India now has the lowest tariffs among major Asian economies. These include China, Pakistan, Indonesia, Bangladesh, and Vietnam.
