Relevance: GS II (International Relations – Bilateral Agreements) | Source: The Hindu
1. The Context: A Diplomatic U-Turn
The United States has quietly backtracked on specific claims made in its official “Factsheet” and Joint Statement regarding the recent India-U.S. interim trade agreement.
- The Issue: The original text contained “added references” that India had not agreed to, sparking a political storm in New Delhi about surrendering national interest.
- The Fix: Facing pushback, the U.S. updated the documents to align with India’s actual position, removing sensitive items like pulses and digital tax.
2. Key Changes: Defending “Red Lines”
The revisions highlight three major victories for India’s negotiating team:
| Issue | Original US Claim (Removed/Modified) | Why it matters? |
| Pulses | Listed as an item where India would reduce tariffs. | Dropped completely. Imports of cheap US pulses would crash domestic prices, hurting Indian farmers. This protects Food Sovereignty. |
| $500 Bn Investment | Stated India was “committed” to purchasing $500bn of US goods. | Changed to “India intends” to purchase. This clarifies it is a broad aspiration, not a binding debt obligation. |
| Digital Tax | Claimed India “will remove” its Digital Services Tax. | Deleted. India has only agreed to negotiate, not surrender its sovereign right to tax digital giants immediately. |
3. Why is this significant?
- Farmer Protection: By forcing the removal of “Pulses” and “Agricultural Products” from the official text, the government has shielded itself from potential farmer protests.
- Diplomatic Signal: The quick correction shows that despite “America First” rhetoric, the U.S. is sensitive to India’s domestic political constraints and cannot unilaterally dictate terms in written statements.
UPSC Value Box
| Concept / Term | Relevance for Prelims |
| Digital Services Tax (DST) | Known in India as the Equalisation Levy. It is a direct tax on non-resident e-commerce operators (like Google/Facebook). The U.S. opposes this, terming it “discriminatory” against American tech firms. |
| Non-Tariff Barriers (NTB) | Trade barriers that restrict imports without using direct tax (tariffs). Examples: Sanitary and Phytosanitary (SPS) measures, strict labeling rules. |
| Generalized System of Preferences (GSP) | A U.S. trade program that gave preferential duty-free entry for thousands of Indian products. It was withdrawn in 2019, and its restoration is often a key demand in trade talks. |
Q. With reference to the “Equalisation Levy” in India, often seen in the news during trade negotiations, consider the following statements:
- It is a tax aimed at taxing the digital economy, specifically non-resident service providers.
- It was introduced as a part of the Goods and Services Tax (GST) regime.
- The United States has previously launched investigations against this levy under its Trade Act of 1974.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Correct Answer: (b)
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