India has announced reforms to streamline its import quality checks, addressing concerns raised by the United States as both nations work toward finalizing a trade agreement. The reforms represent a step in ongoing negotiations between New Delhi and Washington, aimed at resolving tariff disputes.

Key Reform Measures

The trade ministry outlined several improvements to the import quality check process:

Background and Context

The reforms address US concerns over what it described as India's "burdensome" import-quality requirements. These concerns have been a point of contention in trade discussions between the two nations. New Delhi and Washington have been working to negotiate a trade agreement that could resolve several ongoing disputes.

Trade Agreement Implications

India hopes the broader trade agreement may bring relief from the 50% tariff imposed by President Donald Trump on some of its main exports. These tariffs were implemented as a response to India's Russian oil purchases, creating additional strain on bilateral trade relations.

Official Statement

Jaxay Shah, chairman of the Quality Council of India, commented on the changes. "The reforms aim to accelerate processes, reduce turnaround times, and leverage technology-driven systems to make quality assurance faster, more transparent, and more accessible for enterprises, institutions, and citizens," Shah stated.

Expected Impact

The reforms are designed to benefit multiple stakeholders, including enterprises, institutions, and citizens by creating a more efficient and transparent import quality assurance system. The technology-driven approach is expected to improve processing speeds while maintaining quality standards.

These reforms are seen as a step in addressing US concerns and potentially paving the way for a trade agreement that could resolve ongoing tariff disputes between the two nations. As negotiations continue, both countries appear to be working towards finding common ground and improving their trade relationship.

India's external trade landscape in FY25 presented a complex narrative of record-breaking achievements alongside significant geopolitical and policy challenges. The year began with optimism for expanding bilateral agreements and enhanced market access, particularly with the United States, but unfolded against a backdrop of global conflicts, shifting trade policies, and renewed protectionism that tested the resilience of Indian exporters.

Record Export Performance Despite Global Headwinds

India achieved record exports of $825.25 billion in FY25 with a 6.05% growth rate, demonstrating remarkable strength despite multiple global disruptions. The ongoing Russia-Ukraine war and Israel-Gaza conflict significantly disrupted global supply chains, while sanctions on Russia and heightened tensions in the Red Sea pushed up freight and insurance costs for exporters across various sectors.

Escalating US Trade Tensions and Tariff Challenges

The trade relationship with the United States became increasingly strained throughout FY25. The US unveiled global tariffs with a baseline rate of 10% across imports, alongside reciprocal tariffs targeting select countries. India faced a particularly steep 26% tariff, raising significant concerns across export-oriented sectors, though reciprocal tariffs were initially paused for 90 days to allow negotiation space.

The situation deteriorated further when the US doubled tariffs on Indian goods to 50%. Commerce Minister Piyush Goyal responded firmly, stating that India would not accept external pressure on its sovereign trade decisions and emphasizing that sourcing choices were matters for the global community rather than unilateral decisions.

Strategic Trade Diversification Initiatives

Away from US trade tensions, India made substantial progress in diversifying its trade partnerships through multiple bilateral agreements. India signed a free trade agreement with the UK, though operationalization remains pending. The FTA with the European Free Trade Association, comprising Switzerland, Norway, Iceland, and Liechtenstein, came into force, opening new opportunities for Indian exporters across these developed markets.

India concluded negotiations for a Comprehensive Economic Partnership Agreement with Oman, granting duty-free access to over 98% of Omani tariff lines and covering nearly all Indian exports to the country. Most recently, India completed negotiations for an FTA with New Zealand, further expanding its network of preferential trade arrangements.

Key Export Performance Drivers

Several sectors led growth in exports:

• Electronics: Emerged as a key growth driver
• Engineering goods: Maintained strong performance
• Pharmaceuticals: Continued robust export growth
• Marine products: Showed significant expansion
• Rice: Contributed substantially to agricultural exports

Key destination markets included Spain, Hong Kong, China, and the UAE, which emerged as particularly strong markets for Indian exporters.

Government Policy Response and Support Measures

The government implemented several policy measures to support exporters facing global challenges. The Export Credit Guarantee Corporation upgraded country risk ratings for 24 nations, effectively lowering insurance costs and reducing exposure to volatile markets. Currency depreciation provided natural relief to exporters, while GST rate rationalization offered additional domestic support.

The newly announced export promotion mission, specifically aimed at incentivizing market diversification, is expected to play a crucial role in supporting exporters in the coming months.

Ongoing Negotiations and Future Outlook

As negotiations with the US continue, officials maintain cautious expectations about immediate breakthroughs. Commerce Secretary Rajesh Agrawal has emphasized that discussions with the US remain complex and multi-layered, involving both a comprehensive bilateral trade agreement and a parallel framework deal to address reciprocal tariff challenges.

Beyond the US relationship, India is actively pursuing negotiations with multiple partners including the European Union, the Eurasian Economic Union, MERCOSUR, Chile, Peru, and the Maldives. Reviews are underway for the ASEAN FTA, while expanded agreements are being explored with Australia and the UAE. Terms of reference have been finalized for potential deals with Israel, Qatar, and the Gulf Cooperation Council, representing significant potential for further trade expansion and diversification.