The American side has asked for tariff concessions on petrochemical exports to India, even as their Indian counterparts are pushing more value addition to be done in India—less imports from the US of finished goods and more of raw materials to be processed in India.
Currently, India imports both raw materials—mostly crude oil—and finished goods of the petrochemical value chain from the US, including polypropylene (PP), low-density polyethylene (LDPE), styrene-butadiene rubber (SBR), among others. These products in turn become raw materials for Indian industries such as packaging, automotive, construction, and textiles.
In return, India supplies refined and processed petrochemical products to the US such as diesel, aviation turbine fuel, aromatic compounds such as benzene and paraxylene, which are used in plastics and synthetic fibres.
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If India can get more raw materials instead of finished goods from the US, it would enhance the country’s domestic manufacturing capabilities, generate employment, and boost exports of higher-value petrochemical products, the people cited above said.
To be sure, India already charges comparatively less duties compared to the US on petrochemical trade. As per commerce ministry data, Indian products exported to the US face tariffs of 0-7%, while US products exported to India attract 0-5% duty.
The Indian delegation, led by commerce and industry minister Piyush Goyal, is in Washington for trade talks.
“The discussions with the US policymakers are still ongoing. The Indian side is hoping for a better understanding with its counterparts and to agree on matters that will be mutually beneficial while keeping the interests of each other’s domestic markets protected,” said the first person.
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“The issue of tariff relaxation of petrochemicals has come up in the discussion,” the second person said. “The negotiating team is working on it.”
“With India and the US negotiating a bilateral trade agreement (BTA), energy exports from the US are expected to rise,” the third person said. “Energy trade will be a key component of this, and the US is seeking concessions on petrochemicals.”
The US is a significant exporter of petrochemicals to India. According to commerce ministry data, the US exported petrochemicals worth $7.23 billion to India in FY24, while India’s petrochemical exports to the US stood at $5.83 billion, reflecting a trade imbalance in favour of the US. In FY25 (until November), US petrochemical exports surged to $6.4 billion, while India’s exports stood at $2.88 billion, indicating a widening gap.
Queries emailed to the secretary of department of chemicals and petrochemicals and spokespersons of the ministries of commerce, petroleum and natural gas, US Embassy in New Delhi, and the United States Trade Representative (USTR) remained unanswered till press time.
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With the US to announce the implementation of 25% tariffs on Indian steel and aluminium on 12 March and the reciprocal tariff plan on 2 April, India is also weighing the implications of US tariff measures on other sectors, including textiles and automobiles. The outcome of these negotiations will shape the future of India-US trade ties.
The US is slated to .
Tariff disparities
The second person cited above added that India generally imposes less than 10% duty on most of the essential goods imported from the US. However, for certain products, the tariffs are set higher to safeguard domestic industries from foreign competition, this person added.
For example, Indian electronics products exported to the US face an average tariff of 0.41%, as per the commerce ministry data, while US exports to India face a duty of 7.64%, resulting in a tariff difference of 7.23 percentage points. Such tariff differentials exist for some other areas such as agriculture, meat, and processed food products, as well as diamonds, gold, and related products.
The petrochem story
The negotiations come in the backdrop of India’s robust demand for petrochemicals. According to a Press Information Bureau release dated 18 October 2024, the Indian chemicals and petrochemicals sector is expected to grow to approximately $300 billion by 2025, up from its current market size of $220 billion. The demand for chemicals is predicted to nearly triple, and India’s petrochemicals industry could reach $1 trillion by 2040.
India’s rising demand for petrochemicals is closely linked to the growth of exports in textiles, plastics, and pharmaceuticals, as these industries rely heavily on petrochemical-based raw materials.
Textile exports to the US were valued at $11.76 billion in FY22, but saw a decline to $10.44 billion in FY23 and further dropped to $10.02 billion in FY24. In the ongoing fiscal year so far (April-January), exports are at $8.94 billion, compared to $8.02 billion in the same period in FY24.
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In FY22, drugs and pharmaceuticals exports to US were valued at $7.08 billion, rising to $7.55 billion in FY23 and $8.73 billion in FY24. In the current fiscal year so far, exports stood at $8.03 billion, compared to $6.91 billion in April-January (FY2024).
“With the US significantly increasing its petrochemical production, driven by abundant shale gas resources, it is likely pushing for duty-free access to India to secure a stable export destination for its surplus supply. However, our policymakers will find a better solution,” said Dattesh Parulekar, assistant professor of international relations at Goa University, adding that trade between the two nations should be mutually beneficial.
“If the US grants concessional tariffs on Indian petrochemical exports, it will benefit Indian companies, as China, the major global supplier of petrochem products, faces high US tariffs,” said Deepak Mahurkar, partner at PwC India.
“In case of India reciprocating offering concessional differential tariffs to the US, which is somewhat unlikely, it would put the US suppliers in beneficial position over the Europe and Middle East, which are key suppliers of value-added chemicals to India. This could lead to shifts in sourcing patterns and might create trade-offs for Indian exporters and importers,” Mahurkar added.
India’s merchandise exports to the US have been on an upward trajectory in recent years. In FY22, exports were valued at $75.6 billion, which increased to $78.31 billion in FY23, demonstrating a strengthening trade relationship. Although FY24 saw a slight dip to $77.52 billion—primarily due to supply chain disruptions—the long-term trend remains positive.
Key export products include engineering goods, electronic products, gems and jewellery, drugs and pharmaceuticals, petroleum products, textiles, marine products, leather and leather-manufactured goods, spices, among others.
To be sure, the US has a trade deficit with India, which was $35.32 billion in FY24.
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