India-US Trade Pact Sparks Economic Optimism

The Indo-US trade deal promises increased FDI and portfolio investments, positively affecting the Indian rupee. With reduced tariffs on Indian goods, notably in textiles and jewelry, exports to the US are expected to rise. The agreement marks significant progress in India-US economic relations.

The recently announced Indo-US trade deal is poised to significantly bolster foreign direct investment and portfolio investments in India, enhancing the value of the rupee, according to S Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister.

In a breakthrough agreement, the United States has agreed to lower the reciprocal tariff on Indian goods to 18 percent, a rate more favorable than what is currently being imposed on imports from countries like China, Bangladesh, and Vietnam. Following a phone conversation with Indian Prime Minister Narendra Modi, President Donald Trump confirmed the deal, which was met with optimism by Indian officials.

The deal is expected to benefit various labor-intensive sectors such as textiles and gems and jewelry. The Trump administration previously imposed a hefty 50 percent tariff, significantly impacting India's export sector. The new tariff of 18 percent is anticipated to enhance India's export growth not only to the US but potentially beyond, helping to counter previous economic uncertainties and strengthen the rupee.

(With inputs from agencies.)