India-US initial trade deal likely before tariff freeze ends: Nomura

India is aiming to sign a preliminary trade deal with the United States within the ongoing 90-day tariff pause, which could position it to benefit from trade diversion away from China and potentially improve export competitiveness.India has offered zero tariffs on most products to the United States, excluding sensitive items like wheat, maize, rice, and dairy, as part of ongoing trade talks, according to people familiar with the matter. The US, in turn, is looking to maintain tariffs on Indian goods at 10%. While both sides have agreed on most issues, discussions continue around non-tariff barriers. The US has shared a list of 70 such barriers with India.
Sonal Varma, Chief Economist at Nomura, said, “One is hopeful that within the 90-day tariff pause, some sort of a preliminary Memorandum of Understanding (MoU) is going to be signed.” She noted that India could gain from trade diversion, particularly as tariffs on China remain elevated.
Also Read | HSBC economist expects softer growth this year, with consumption outpacing investmentThe short-term benefit could come from India securing a more favourable tariff position than some of its competitors in Southeast and South Asia. In the medium term, supply chain shifts may further strengthen India’s export position. “If India can negotiate a reciprocal tariff… lower than where we are right now, we could gain,” Varma added.

Currency trends are also being closely watched. Ashhish Vaidya of DBS Bank said, “If trade negotiations happen in a positive manner, we will see emerging market currencies gain considerably.” He explained that the dollar’s recent weakening against emerging market currencies is part of a typical pattern, starting with developed markets before shifting to Asia.

For India, appreciation of the rupee will depend on sustained foreign inflows into debt and equity. Vaidya expects the rupee to trade between 83 per US dollar and 85 per US dollar in the near term, barring geopolitical shocks.

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While India does not face immediate currency-related risks, Varma cautioned that “non-tariff barriers” affecting India include domestic quality control orders, which could remain a sticking point in talks. However, she noted that India is still relatively well-positioned in Asia despite short-term headwinds to global demand.

For the full interview, watch the accompanying video

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