Relevance: GS II (International Relations – Bilateral Agreements) | Source: The Hindu
1. The Context: A Diplomatic Correction
Following the announcement of an interim trade agreement framework (Feb 2026), the United States released a “Factsheet” and Joint Statement that sparked controversy in New Delhi.
- The Issue: The documents claimed India had made specific commitments on sensitive issues like agriculture and taxation which Indian officials denied agreeing to.
- The Update: Facing pushback, the U.S. quietly updated the documents to remove or modify these contentious points, aligning them with India’s actual position.
2. Key Changes: What was Dropped?
The revisions highlight India’s successful defense of its “Red Lines”:
| Issue | Original Claim (US Version) | Corrected Status | Why it matters? |
| Pulses | Listed as an item where India would reduce tariffs. | Dropped completely. | Imports of cheap US pulses would hurt Indian farmers. This protects Food Sovereignty. |
| $500 Bn Deal | India is “committed” to purchasing $500bn of US goods. | Changed to “India intends” to purchase. | Clarifies this is a non-binding aspiration (market potential), not a sovereign debt obligation. |
| Digital Tax | India “will remove” its Digital Services Tax (DST). | Deleted. | India has only agreed to negotiate digital trade rules, not surrender its taxing rights immediately. |
3. Strategic Significance
- Farmer Protection: By removing “Pulses” and “Agricultural Products” from the binding list, the government has shielded itself from potential farmer protests regarding price crashes.
- Sovereign Autonomy: The shift from “Committed” to “Intends” ensures India is not legally bound to buy U.S. goods (like aircraft or defense tech) unless it suits our national interest.
UPSC Value Box
| Concept / Term | Relevance for Prelims |
| Digital Services Tax (DST) | Also known as the Equalisation Levy in India. It is a tax imposed on non-resident e-commerce operators (like Google/Facebook) for the online services they provide to Indian users. The U.S. often opposes this as “discriminatory.” |
| Sensitive List | In Free Trade Agreements (FTAs), a “Sensitive List” contains items (usually agriculture/textiles) on which no tariff reduction is offered to protect domestic industry. |
| Totalization Agreement | A recurring demand by India in US trade talks. It seeks to exempt Indian professionals working in the US from paying social security taxes if they are not going to benefit from them. |
Q. With reference to the “Equalisation Levy” in India, often seen in the news, consider the following statements:
- It is a direct tax levied on the income accrued to foreign e-commerce companies from India.
- It was introduced to tax digital transactions of non-resident service providers who do not have a permanent establishment in India.
- The United States Trade Representative (USTR) has previously termed this levy as discriminatory against U.S. commerce.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Correct Answer: (d)
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