NITI Aayog’s Q3 FY25 “Trade Watch Quarterly,” report details India’s growing export potential due to the US’s new tariff structure. The report highlights that India is poised to grow its share in the US market due to favourable tariff differentials in key product categories. The country holds a competitive edge in 22 of the top 30 HS-2-level categories and 78 of the top 100 HS-4-level categories. While India’s trade deficit has widened, services and high-tech exports show strong growth.
India and the US are negotiating an interim trade deal, with India seeking concessions for labour-intensive exports while resisting demands on agricultural products. The report recommends focusing on digital trade, value chain integration, and service-sector agreements.
On July 14, 2025, Dr. Arvind Virmani, Member of NITI Aayog, unveiled the third edition of the “Trade Watch Quarterly” report for the third quarter of financial year 2025 (October to December).
According to the report, India is poised to expand its presence in the US market, supported by Washington’s evolving tariff regime that offers favourable differentials across over 100 key product categories. The report states that India is expected to gain competitiveness in 22 of the top 30 product categories at the HS-2 level. These categories account for 61% of India’s exports to the US and 68% of total US imports in these segments. At a more detailed HS-4 level, India enjoys a favourable tariff differential in 78 of the top 100 products, which together represent around 52% of its shipments to the US.
This opportunity, the report noted, stems from the US imposing higher import tariffs on trade partners such as China (30%), Canada (35%), Mexico (25%), making Indian products comparatively more affordable and appealing in the US market.
Since April 2025, a baseline 10% duty applies to all imports into the US, creating what the report describes as a “strategic window” for Indian exporters to increase their market share. Sectors identified include nuclear reactors, electrical machinery, vehicles, apparel, and textiles. Even in six of the top 30 HS-2 product lines where India faces a tariff disadvantage, the gap is modest at around 1%, allowing India to stay broadly competitive.
India’s Q3 FY25 trade performance demonstrated steady resilience amid global demand slowdown and geopolitical uncertainties. Merchandise exports grew by 3% year-on-year to US$ 108.7 billion, while imports rose by 6.5% to US$ 187.5 billion. This widened the merchandise trade deficit to US$ 78.7 billion. However, services exports surged by 17% to US$ 102.6 billion, creating a US$ 52.3 billion surplus that partially offset the goods trade gap.
The report highlights that India ranked as the world’s fifth-largest exporter of Digitally Delivered Services (DDS) in 2024, reaching US$ 269 billion in exports. Key segments included IT services, professional consulting, and R&D outsourcing. In merchandise exports, there was a noticeable rise in high-tech and value-added sectors. Exports of aircraft, spacecraft, and related parts surged by over 200%, entering India’s top 10 export categories for the first time, driven by demand from Saudi Arabia, the UAE, and the Czech Republic.
In 2024, India’s high-tech exports stood at US$ 80.6 billion, having grown at a CAGR of 10.6% since 2014 and contributing 18.3% to total merchandise exports. Electrical machinery and parts now account for half of these high-tech exports, overtaking nuclear reactors and boilers.
In digitally delivered trade, ‘Other Business Services’ contributed 53% of DDS exports in 2024, while ‘Computer Services’ accounted for 39%.
The report emphasises that shifting trade alignments—especially India’s tariff advantage in the US—highlight the need for flexible and responsive policy measures. Recommendations include deepening integration with global value chains, expanding production-linked incentive schemes for labour-intensive sectors, and pursuing services-focused trade agreements. The report recommends giving priority to digital trade, cross-border data flows, and mutual recognition of standards in any future US-India trade agreement to strengthen India’s export position. It further suggests negotiating a services-focused trade pact with the US, similar to the India–UK model, with emphasis on comprehensive digital trade provisions and key sectors like information technology, financial services, education, and professional services.
US Tariffs
The Trump administration had announced its tariff initiative on April 2, targeting multiple countries, including India. Its rollout was first delayed to July 9, and then further postponed to August 1. By July 7, the US had sent tariff notifications to a wide group of nations such as Japan, South Korea, Indonesia, Malaysia, Thailand, South Africa, and others.
India and US are working toward finalising an interim deal by the fall, with a more comprehensive agreement anticipated to develop in the following months. The US aims to secure tariff cuts on industrial goods, automobiles—especially electric vehicles—wines, petrochemicals, and a range of agricultural products like dairy, apples, tree nuts, and genetically modified crops. Notably, India has declined US demands for tariff concessions on agricultural and dairy imports, pointing out that it has not extended such benefits in any of its earlier free trade agreements. India is also seeking trade concessions for its labour-intensive exports, including textiles, garments, gems and jewellery, plastics, chemicals, leather products, shrimp, oil seeds, grapes, and bananas. Simultaneously, India is advocating for the removal of steep US duties on its exports of steel (50%), aluminium (50%), and automobiles (25%).
In line with World Trade Organization regulations, India has also retained the right to impose retaliatory tariffs if necessary. However, a successful deal could alter the trade landscape in the world’s largest consumer market and potentially reset Indo–US trade ties.
