Finance Minister Nirmala Sitharaman on Tuesday said the recently sealed India-US trade deal is expected to significantly accelerate the global China+1 strategy, offering fresh momentum to India’s export sector and investment inflows.
Speaking to Hindustan Times, Sitharaman described the agreement as a “major relief” for Indian exporters, noting that reduced trade barriers would improve India’s competitiveness in global markets. Under the deal, the United States has lowered tariffs on Indian imports to 18%, down from 50%, ending months of tense bilateral trade negotiations.
“The agreement is very welcome and will be a big relief to our exporters,” Sitharaman said, adding that India now stands at an advantage compared to competing manufacturing hubs.
China+1 Strategy Explained
The China+1 strategy encourages global companies to reduce their dependence on China by expanding operations to at least one additional country. First gaining traction around 2013, the strategy emerged as businesses sought to diversify supply chains amid rising geopolitical and cost pressures.
India is among a group of 18 global economies participating in supply-chain diversification efforts, alongside countries such as Vietnam, Thailand, and Indonesia. With its large domestic market, skilled workforce, and improving trade partnerships, India is increasingly seen as a preferred alternative destination.
Trade Deal May Boost Capital Inflows
Sitharaman also linked the trade deal to potential improvements in capital inflows, at a time when the Indian rupee has faced pressure despite foreign exchange reserves crossing $700 billion.
“Capital inflows have slowed as some investors booked profits and exited. Convincing large global fund managers to return remains a challenge not just for India, but for many economies,” she said. However, the finance minister expressed optimism that the agreement with the US could reverse this trend.
“After the recent discussions, I believe things will change. You will see the China+1 strategy play out fully now,” she added.
Background on Tariff Cuts
The earlier US tariffs included penalties imposed during former President Donald Trump’s tenure, partly linked to India’s oil trade with Russia. Trump has since claimed that Prime Minister Narendra Modi assured Washington that India would halt oil purchases from Moscow and increase imports of US goods worth over $500 billion. These claims have not yet been officially confirmed by Indian authorities.
Despite lingering uncertainties, the trade deal is widely viewed as a positive step toward deeper India-US economic cooperation and long-term supply-chain resilience.
