India turns back on Russian crude to strike major ‘buy American’ deal with Trump

India has agreed to purchase oil products, defense equipment, electronics, pharmaceuticals, and telecommunications products, as well as aircraft from the United States as part of a trade deal, a government official told Reuters on Tuesday. US President Donald Trump announced the trade agreement with India on Monday, which reduces US tariffs on Indian products to 18% from 50%, in return for India stopping its purchases of Russian oil and lowering trade barriers.

Trump stated that India agreed to "BUY AMERICAN at a much higher level." He also mentioned that India could purchase up to $500 billion worth of American energy, coal, and other products, as well as technological, agricultural, and other goods. The Indian government official, who requested anonymity, stated that India agreed to buy American products in order to reduce the trade deficit that the US has with India.

India's Ministry of Commerce did not immediately respond to a Reuters request for comment. India's exports to the US increased by 15.88% year-on-year, reaching $85.5 billion in the January–November period, while imports stood at $46.08 billion, according to data from the Ministry of Commerce.

What the purchase commitment includes

"The commitment to purchase American products covers sectors such as pharmaceuticals, telecommunications, defense, petroleum products, and aircraft. It will be implemented gradually over the coming years," the official told Reuters. He added that India has also offered market access for certain agricultural products, without providing further details.

First phase of the agreement and next steps

The same official noted that the deal represents the first phase and that a more comprehensive agreement will be negotiated in the coming months. As part of the deal, India has reduced tariffs on automobiles, responding to a direct demand from Washington to address the trade imbalance.

Market reaction

The announcement boosted investor sentiment on Tuesday. India's main stock index, the Nifty 50, rose nearly 3% after a 5% jump at the open, while the rupee strengthened by more than 1%, reaching 90.40 per dollar in early trading.

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