US-India trade deal could unlock $500 bn: Panagariya

India is on the brink of securing a major trade agreement with the United States, a move that could lead to extensive economic liberalisation within the country. Arvind Panagariya, Chairman of the 16th Finance Commission, has expressed that this development will be a “big shot in the arm” for India, as it negotiates both the US and EU trade deals. According to Business Today, these agreements are expected to make India an attractive destination for investors due to increased market access and reduced border friction.
President Donald Trump has continuously expressed optimism about the impending trade deal. He recently stated, “We’re very close to a deal with India, where they open it up,” Panagariya told news agency PTI during an interaction. This agreement has been a focal point of discussions, with a deadline set for 1 August by Trump, after which countries, including India, might face steep tariffs.
Panagariya highlighted the dual benefit of the US-India agreement, emphasising that “The most important thing is that this will result in a lot of liberalisation by India itself, and that, I think, is a very large part of the story. Of course, better access to the US market relative to its other competitors is a big plus also.” This liberalisation is seen as a key component of India’s economic strategy moving forward.
Commerce Minister Piyush Goyal has indicated that negotiations with the US are making “fantastic progress.” This sentiment is shared by Howard Lutnick, US Commerce Secretary, who voiced his optimism for a deal in the near future. The potential agreement is expected to significantly reduce tariffs, paving the way for more robust bilateral trade.
In terms of economic impact, the agreement could greatly enhance India’s trade balance. In 2024, US goods trade with India reached $129.2 billion. With a strategy dubbed ‘Mission 500’, Prime Minister Narendra Modi and President Trump aim to boost bilateral trade to $500 billion by 2030. This ambitious goal underlines the significance of the impending agreement.
Panagariya further noted, “With these two trade deals, India will have an open market with the European Union, with the United States. These are the two largest markets. For any future investor, that makes India a very attractive location because effectively, the friction that is there on the border will melt away, and that is going to be an absolute game changer.” Such an open market is anticipated to attract significant foreign investment.
Highlighting the forthcoming economic opportunities, Panagariya mentioned, “This is a tremendous opportunity for India, and it is very seriously negotiating the agreement with the United States. So I’m sort of hoping to hear the good news.” This optimism is mirrored by the broader Indian economic outlook, which anticipates robust growth and development.
The transition from a rural agricultural economy to one dominated by industry and services remains a key challenge for India. As Panagariya stated, “Therefore, the creation of well-paid jobs in industry and services is the biggest challenge.” The successful negotiation of the US-India trade deal could potentially address some of these challenges by opening new avenues for economic reform and investment.