Relevance: GS II (International Relations – Bilateral agreements) | Source: The Hindu / Live Mint

1. The Deal: A Major Relief

On February 3, 2026, India and the United States announced a landmark trade agreement, ending a year of economic friction.

  • Tariff Cut: The US has slashed tariffs on Indian goods from a steep 50% to 18%.
  • Competitive Edge: This new rate (18%) gives India an advantage over regional competitors like Vietnam (20%) and Bangladesh (20%), making Indian exports cheaper in the American market.
  • The Penalty Removed: The deal specifically scraps the 25% punitive duty that was imposed in 2025 due to India’s purchase of Russian oil.

2. The Quid Pro Quo (Give and Take)

In international relations, there are no free lunches. In exchange for lower tariffs:

  • Energy Pivot: India has agreed to shift its energy imports away from Russian oil.
  • New Sellers: India will likely increase oil purchases from the United States and potentially Venezuela.
  • “Buy American”: India has committed to increasing imports of US technology, energy, and agricultural products.

3. Why it Matters

  • The Crisis (2025): Relations had soured when the US argued that India’s purchase of discounted Russian oil was funding the war in Ukraine. This led to high tariffs that hurt Indian sectors like textiles and leather.
  • The Shift: This deal signals a strategic realignment. India is prioritizing access to the massive US market and deepening the iCET (Critical and Emerging Technology) partnership over its energy ties with Russia.

UPSC Value Box

Concept / Term Relevance for Prelims
Reciprocal Tariffs A trade policy where Country A sets its tariff rates on Country B’s goods at the same level that Country B charges on Country A’s goods. (e.g., “If you tax our Harley Davidsons, we tax your mangoes”).
iCET Initiative on Critical and Emerging Technology. A framework between India and the US to collaborate on AI, quantum computing, semiconductors, and space, bypassing traditional bureaucratic hurdles.
Strategic Autonomy A foreign policy doctrine where a country (like India) makes decisions based on its own national interest, avoiding formal military alliances or total alignment with any single power bloc.

Q. With reference to India-US bilateral relations, the term “iCET” is frequently seen in the news. It primarily focuses on cooperation in which of the following areas?

  1. Counter-terrorism and intelligence sharing.
  2. Critical and emerging technologies like Artificial Intelligence and Space.
  3. Free Trade Agreement (FTA) for agricultural produce.
  4. Visa liberalization for IT professionals.

Correct Answer: (2)

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