India-US Trade Deal Faces Tough Final Hurdles as Key Differences Remain
The proposed India-US trade agreement has moved closer to the negotiating finish line, but a final breakthrough still appears difficult. According to BMI, a unit of Fitch, the two countries have narrowed several differences, yet the issues left on the table are among the most politically and commercially sensitive.
The negotiations are now focused on market access, agriculture, India's purchases of Russian crude oil and the United States' concerns about its trade deficit with India. Finance Minister Nirmala Sitharaman recently described the talks as having reached a “plateau,” while US Trade Representative Jamieson Greer said negotiators had identified the major sticking points.
Why the India-US trade deal is taking longer
India and the US have been working toward a broader bilateral trade agreement, with an interim arrangement intended to address some of the immediate tariff and market-access concerns.
A framework announced in February outlined areas where both countries could make concessions. The US agreed to a reciprocal tariff rate of 18% for qualifying Indian goods under the framework, while India indicated it would reduce or eliminate tariffs on a range of American industrial and agricultural products. The framework also envisaged greater purchases of American energy, aircraft, technology products and other goods.
However, the framework was not the same as a completed trade agreement. The remaining negotiations are concentrated around issues where concessions could have significant economic or political consequences.
BMI therefore expects an interim agreement to remain possible, but sees limited prospects for an immediate breakthrough.
Agriculture is one of India's biggest challenges
Agriculture remains particularly sensitive for India because greater access for American agricultural products could affect domestic producers.
The February framework included products such as tree nuts, fruits, soybean oil, animal-feed products, wine and spirits. India may be able to provide additional access in selected areas, but opening more sensitive categories could become politically difficult.
Dairy and genetically modified agricultural products are particularly challenging areas. BMI expects India to be cautious about offering major concessions unless it receives meaningful benefits in return, particularly improved access for Indian exports to the US market.
This makes agriculture more than a simple tariff issue. It involves the interests of Indian farmers, food producers and consumers, making any concession politically significant.
The trade deficit remains an important US concern
Another major issue is the imbalance in goods trade between the two countries.
The US recorded a $45.7 billion goods trade deficit with India in 2024, according to BMI's assessment. Washington wants India to provide greater access to its domestic market and take steps that could help narrow the gap.
India could increase purchases of American products such as aircraft, energy, technology and defence equipment. The February framework already included India's intention to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over five years.
However, simply increasing purchases may not resolve the deeper US concerns about market access. That means the negotiations are likely to remain focused on structural trade barriers as well as the value of individual purchases.
Russian oil has complicated the negotiations
India's continued purchases of Russian crude have added another difficult dimension.
According to BMI, Russia accounted for around 50.8% of India's crude import volumes in July 2026. India's dependence on multiple sources of energy has become especially important because geopolitical disruptions can affect supplies and prices.
Washington has increased pressure on countries continuing to purchase Russian energy. A US law signed in September gives the administration the authority to impose additional measures, including potentially very high tariffs, on qualifying countries involved in Russian energy purchases.
For India, the issue is therefore not simply about trade. Energy security is also involved. Reducing Russian purchases could have implications for India's sourcing strategy, while retaining them could complicate negotiations with Washington.
A limited interim agreement could come first
One possible solution is for India and the US to conclude a narrower interim agreement rather than immediately resolving every disagreement.
Under such an arrangement, India could offer additional market access for selected American products and increase purchases, while the US could provide preferential treatment for certain Indian exports.
More complicated issues, including dairy, genetically modified products and some regulatory barriers, could potentially be left for later negotiations. BMI considers such a limited arrangement more realistic than trying to settle every outstanding issue at once.
For Indian exporters, one of the biggest advantages of an agreement would be greater certainty. Even if the immediate increase in exports is modest, a clearer tariff environment could make it easier for companies to plan prices, contracts, production and investment.
What businesses should watch next
The coming weeks could be important for the negotiations.
The implementation of the new US measures relating to Russian energy purchases is one development to watch. Another is the US investigation into structural manufacturing overcapacity, which covers sectors including petrochemicals, steel and solar modules. These issues could influence the broader tariff environment facing Indian exporters.
The December G20 summit in Miami could also provide a political opportunity for India and the US to push negotiations forward. BMI sees continued talks as likely, although it does not expect an agreement by that point to be certain.
What the trade deal could mean for India
A successful interim agreement could provide Indian exporters with greater visibility in the US market and reduce the uncertainty surrounding future tariffs.
Sectors that depend heavily on American demand could benefit if preferential access is secured. At the same time, India will need to balance export opportunities against the interests of domestic industries, particularly agriculture.
The broader lesson is that the India-US negotiations are no longer primarily about reducing tariffs. They involve market access, energy security, trade deficits, industrial policy and geopolitical considerations.
The two countries still have strong reasons to reach an agreement, but the remaining disputes are concentrated in precisely the areas where compromise is hardest. That is why the next stage of negotiations could be more difficult than the progress achieved earlier in the talks.
For now, the most realistic expectation is not an immediate comprehensive breakthrough, but continued negotiations aimed at finding a narrower agreement while leaving some of the most sensitive questions for a later stage.
