US-India tariff truce likely within the next two months: CEA Nageswaran

India’s chief economic adviser (CEA) V. Anantha Nageswaran struck an optimistic note on Thursday, saying he expected a resolution to the tariff stand-off with the US within the next two months, even as he projected steady momentum in India’s domestic economy.

Speaking at an industry gathering in Kolkata, Nageswaran said he believed Washington would soon roll back the additional 25% tariff imposed on New Delhi for buying Russian oil.

“Beneath the surface, lots of conversations are going on between the two governments... Although I don't have a crystal ball or any insider information, I can say that my personal confidence is that in the next couple of months, if not earlier, we will see a resolution, at least to the extra tariff of 25%,” he said.

“It may also be the case that the reciprocal tariff of 25% may also come down to levels that we were anticipating earlier. Somewhere between 10% and 15%, if that comes, that will be an even bigger occasion for celebration,” he added.

India and the US are navigating a sensitive phase in their trade ties after President Donald Trump imposed steep 50% tariffs—a 25% reciprocal tariff, and 25% for buying oil from Russia—on Indian exports.

While the measures have unsettled exporters, both governments remain in intensive talks to defuse tensions.

The US is not only India’s largest trading partner but also among the few major economies with which New Delhi enjoys a sizeable trade surplus.

That surplus widened 16.6% annually in 2024-25 to $41.18 billion, as exports to the US rose 11.6% to $86.51 billion while imports increased 7.4% to $45.33 billion. By contrast, India’s overall goods trade deficit ballooned to $282.8 billion.

However, both sides have agreed to intensify efforts toward an early, mutually beneficial trade agreement.

While India’s merchandise exports to the US stood at $86.51 billion in 2024-25, less than a fifth of total goods exports, Nageswaran said the impact of a trade thaw would be felt well beyond raw numbers.

“The sentiment effect and the potential for growth that these numbers indicate are not insignificant,” he said, adding that clarity on tariffs would bolster capital formation and business confidence.

Economic growth

Turning to the broader economy, he pointed to India’s 7.8% growth in the first quarter of the current fiscal year (Q1FY26), crediting robust manufacturing and services activity.

Agriculture is likely to add to momentum in the coming quarters, thanks to healthy sowing patterns, reservoir levels, and monsoon rains, he said.

Early data from July and August suggested second-quarter growth could again top 7%, he added.

Nageswaran also underscored the government’s emphasis on sustained public investment, citing a more than threefold jump in capital expenditure since 2019, from ₹3.1 trillion to over ₹10 trillion.

“Even if these numbers stabilize in the next few years, it is not a walk-back on the government’s commitment,” he said.

“We need to assimilate and digest what has already been done,” he added.

On structural reforms, he called deregulation and ease of doing business crucial, noting that ongoing efforts at both the central and state levels were beginning to simplify compliance and improve trust between government and business.

The CEA to the Centre also acknowledged that foreign direct investment inflows, while robust in gross terms, had seen significant repatriation, but argued that this reflected long-term profit-taking rather than waning confidence.

“Fresh money is still coming in,” he said, adding that $25 billion in new investments have come in the June quarter alone.