Trade agreements are often announced with promises of growth, opportunity, and stronger global positioning. However, their real impact is felt far from press conferences — in farm mandis, small manufacturing units, export hubs, and the daily operations of MSMEs. The US–India interim trade agreement, announced in early 2026, has once again brought this reality into focus.
Positioned as a stepping stone toward a full Bilateral Trade Agreement, the deal aims to reduce tariffs, stabilise trade relations, and expand market access between India and the United States. While the government has highlighted export growth and job creation, concerns remain over how the agreement may affect Indian farmers and MSMEs, which together form the backbone of the domestic economy.
Understanding the US–India Trade Agreement
The current agreement is an interim framework rather than a final treaty. Its primary objective is to ease trade tensions, roll back high tariffs imposed earlier, and create momentum for a comprehensive trade pact in the future.
Key elements of the agreement include reduced US tariffs on Indian goods, preferential or zero-duty access for select Indian exports, and India’s commitment to lower certain tariffs and ease non-tariff barriers on specific US products. At the same time, Indian authorities maintain that sensitive sectors, particularly core agricultural products, remain protected.
Why Farmers and MSMEs Are Central to the Debate
Agriculture continues to support a large section of India’s population, either directly or indirectly. Even minor disruptions in prices or market access can have serious social and economic consequences. Similarly, MSMEs account for a significant share of India’s GDP and employment, operating with limited financial buffers and high sensitivity to policy changes.
Because of this, trade liberalisation is always a balancing act. It can open new doors while simultaneously exposing vulnerable sectors to increased competition.
Pros of the US–India Trade Agreement
One of the most visible benefits of the agreement is improved market access for Indian exporters. Reduced tariffs make Indian goods more competitive in the US market, particularly in sectors such as textiles, pharmaceuticals, gems and jewellery, leather goods, and engineering products. Many of these sectors are driven by MSMEs and employ large numbers of workers.
Export growth can also lead to job creation in labour-intensive industries, supporting employment in both urban and rural areas. Increased demand for Indian products may benefit ancillary industries such as logistics, packaging, and food processing.
Another key positive is the stated protection of sensitive agricultural products. Staples such as rice, wheat, pulses, dairy, and other essential crops remain outside tariff concessions. This is intended to safeguard food security and protect small and marginal farmers from sudden import shocks.
For MSMEs, the agreement could also support integration into global supply chains. Preferential access and improved trade relations often encourage international companies to source components and services from partner countries, offering growth opportunities for capable domestic firms.
Cons and Risks Associated with the Agreement
Despite official assurances, concerns persist regarding unequal competition. US agriculture benefits from heavy subsidies, advanced technology, and scale advantages. Even limited access for subsidised products could put downward pressure on domestic prices, affecting farmer incomes.
MSMEs also face adjustment challenges. Meeting international quality standards, managing certification costs, and handling currency fluctuations can be difficult for smaller businesses. Without targeted government support, some MSMEs may struggle to compete with imported industrial goods.
There is also the issue of increased import dependence, particularly in energy. While diversification of energy sources is strategically useful, higher imports can impact the trade balance and expose the economy to global price volatility.
Another major concern is transparency. Detailed tariff schedules and safeguard mechanisms have not been fully disclosed publicly, making it difficult for stakeholders to assess long-term implications. Trade agreements affect millions, and clarity is essential for informed debate.
Frequently Asked Questions (FAQs)
1. What is the US–India interim trade agreement?
It is a temporary framework designed to reduce trade barriers and improve market access while negotiations continue for a comprehensive bilateral trade agreement between India and the United States.
2. Is this agreement permanent?
No, the agreement is interim in nature. It serves as a confidence-building measure and a foundation for a more detailed and legally binding trade agreement in the future.
3. How does the agreement affect Indian farmers?
The government states that core agricultural products are protected. However, farmers remain concerned about indirect price pressures from subsidised imports and future concessions in a final agreement.
4. Which sectors are expected to benefit the most?
Export-oriented sectors such as textiles, pharmaceuticals, engineering goods, leather, and gems and jewellery are expected to benefit from reduced tariffs and better access to the US market.
5. How does this deal impact MSMEs?
MSMEs engaged in exports may benefit from improved competitiveness, while others could face increased competition from imported goods, depending on their sector and scale.
6. Are US agricultural products entering India freely?
Sensitive agricultural products remain protected, though limited access may be granted to certain non-essential or processed items under controlled conditions.
7. Will the agreement create jobs?
The government believes the deal can support job creation in export-linked and labour-intensive industries, though the scale of impact will depend on implementation and global demand.
8. Why is transparency a major concern?
Without access to detailed tariff schedules and safeguard clauses, farmers, MSMEs, and policymakers cannot fully assess potential risks or prepare for adjustments.
9. How could this affect India’s trade balance?
Higher imports, particularly of energy and industrial goods, could widen the trade deficit if export growth does not keep pace.
10. What happens next in the trade negotiation process?
Negotiations will continue toward a full bilateral trade agreement, where unresolved issues such as agriculture, digital trade, and services are expected to be addressed in greater detail.
Conclusion
The US–India trade agreement is neither a guaranteed success nor an inevitable threat. It presents real opportunities for exporters and competitive MSMEs, while also posing genuine risks for farmers and vulnerable domestic industries.
Its ultimate impact will depend on how safeguards are implemented, how transparent the process remains, and how effectively domestic support measures are deployed. As discussions move forward, the interests of farmers and MSMEs must remain central to policy decisions.
For India, the challenge lies in balancing global economic integration with the protection of livelihoods at home — a task that will define the true success of the trade agreement.
Report by Toofan Express