India, US close to first tranche of trade deal amid dairy hurdle

India and the United States are nearing the first tranche of a trade agreement, with dairy access remaining a key obstacle. Tariff concessions, Russian oil purchases, energy supplies and rising fuel prices ahead of US midterm elections shape the negotiations.

Washington: India and the United States are close to sealing the first part of a trade agreement, with dairy access the biggest remaining obstacle, as Secretary of State Marco Rubio heads to India.

President Donald Trump on Friday signed an order implementing the Lindsey O Graham Sanctioning Russia and Iran Act and waiving its tariffs on buyers of Russian oil.

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At its core, the trade negotiation is an exchange: lower and predictable US tariffs on Indian goods in return for wider access for American products in India.

Under a framework announced in February, Washington cut its reciprocal tariff on Indian goods from 25 per cent to 18 per cent and removed an additional 25 per cent duty linked to India’s purchases of Russian oil. In return, India committed to eliminate or reduce tariffs on US industrial goods and a range of farm products, including tree nuts, fruit, soybean oil, wine and spirits.

Commerce and Industry Minister Piyush Goyal said on Thursday that the first tranche had been finalised and was in legal drafting, but that implementation would depend on clarity about India’s competitive advantage.

External Affairs Minister S Jaishankar has said the talks are nearing a “landing point”. US Trade Representative Jamieson Greer said on October 2 that a deal was not imminent.

Finance Minister Nirmala Sitharaman on Friday expressed hope that the India-US trade agreement would be concluded at the earliest, in the interest of global trade and bilateral economic ties.

India’s merchandise exports “surged 23 per cent to $44.4 billion in September 2026, while the trade deficit narrowed,” the Consulate General of India in New York said on X on Friday.

Large Indian purchases of US goods, such as commercial aircraft, coking coal, gold, energy and defence equipment, are among the ways the gap could be narrowed.

For India, the energy stakes are practical. Its refineries are configured largely for medium sour crude, a grade that comes mainly from the Gulf and Russia. Lighter US crude and heavier grades can be blended in, but only up to a point. With shipping through the Strait of Hormuz disrupted by the West Asia conflict, replacing Russian barrels quickly is difficult.

At the same time, India has turned sharply towards American gas. The US became India’s largest liquefied natural gas (LNG) supplier for the first time in the March-May quarter, according to Kpler data.

In August, the US supplied more than half of India’s liquefied petroleum gas (LPG) imports, though the UAE overtook it in September as Gulf cargoes rebounded.

Rubio travels to Samarkand, Mumbai and Jamnagar from October 17 (Saturday) to 22. He is scheduled to hold talks with EAM Jaishankar in Mumbai on October 20.

Rising fuel prices ahead of the November 3 midterm elections give Washington its own reasons to avoid sharp supply disruptions.