NITI Aayog pitches US trade deal to unlock India’s services potential

India should build on its successful experience negotiating a services‑focused trade agreement with the UK and pursue a similar pact with the US, government think tank NITI Aayog recommended in its latest Trade Watch report.

The quarterly report, released on Monday, identified services exports as a key driver of India’s trade growth and competitiveness, and outlined specific policy measures aimed at expanding access to the US market in high‑growth, high‑value services sectors.

Citing the rising global demand for digital and professional services and India’s demonstrated comparative advantage in these areas, the think tank emphasized the strategic importance of a services‑oriented approach in deepening bilateral trade relations with the US.

“The agreement should include robust provisions for digital trade, creating a framework for enhanced cross‑border service delivery,” the report said, adding that improved market access for Indian IT, financial, professional, and education services would help sustain innovation‑led growth and job creation.

The report highlighted the central role of Indian professionals and service providers in the global economy and identified visa barriers as a major constraint on growth.

It called on India to advocate for improved visa access for its professionals under H‑1B and L‑1 categories, including provisions for intra‑corporate transferees and independent service providers.

“These measures are crucial for maintaining India’s competitive edge in the global services industry,” the report said.

NITI Aayog further recommended seeking firm market access commitments in emerging high‑growth services such as cybersecurity, artificial intelligence, telecommunications, and design services, areas where Indian firms are already building strong capabilities.

Leveraging these strengths, the report said, would expand bilateral trade with the US while fostering innovation‑led economic development in India.

The report also identified significant regulatory barriers that continue to impede Indian services exports, particularly to developed markets.

Among them are inconsistent data compliance regimes, cumbersome licensing procedures, and intellectual property concerns. It recommended that India and the US work jointly to simplify licensing requirements and address cross‑border data flow issues to enable smoother and more predictable access to the US market for Indian firms.

To further broaden opportunities for Indian service providers, the report advocated expanding the scope of mutual recognition agreements to cover a wider range of professional qualifications.

While Indian IT and business process outsourcing professionals have established a strong presence in the US, other professions such as engineering, architecture, and healthcare remain underrepresented. The report recommended negotiating recognition for these qualifications as part of the trade agreement to diversify India’s services export base.

The focus on a services‑oriented trade pact with the US comes at a time when India’s overall trade performance has shown resilience, but merchandise trade deficits have widened amid rising imports.

Services exports, particularly IT and business services, continue to perform strongly, providing a buffer against merchandise trade imbalances and underscoring the need to sustain and expand this strength.

According to the Trade Watch report, services exports grew by over 10% in the first quarter of FY25 and now account for 4.6% of global services exports.

The report situates this policy recommendation within a broader context of India’s trade dynamics and geopolitical realities. India’s trade with the US has already been growing steadily, making the US India’s largest single trading partner in recent years. However, most of this trade is concentrated in goods, while services trade remains below potential given India’s capabilities.

The proposed agreement aims to correct this imbalance by creating targeted pathways for expanding services trade, which aligns with India’s long‑term strategy of shifting up the value chain.

NITI Aayog also links the push for a services‑oriented pact to the global trends of digitalization and supply chain diversification.

As US businesses and institutions seek reliable and cost‑competitive partners in technology, data, and professional services, India is well‑placed to meet this demand, provided market access barriers are addressed.

“Leveraging India’s strengths in these sectors can help increase bilateral trade and innovation‑led growth,” the report said.

The report drew lessons from India’s experience negotiating the India‑UK services‑focused trade agreement, which included provisions for digital trade, mobility of professionals, and recognition of qualifications.

It argued that the US agreement should build on this model but go further in addressing data‑related and regulatory concerns unique to the US market.

While the report underscored the opportunities, it also acknowledges the risks posed by regulatory fragmentation and protectionist tendencies in developed markets.

It called for a proactive and calibrated negotiating strategy that balances India’s domestic policy priorities with the need for greater external market integration.

At a structural level, the report reiterated that services trade contributes disproportionately to India’s external sector resilience, employment generation, and innovation ecosystem.

With merchandise trade deficits persisting due to high import dependency in energy and capital goods, services exports are vital for stabilizing the current account and sustaining growth.

Expanding services trade with the US, the world’s largest services importer, is therefore both a strategic and economic imperative, the report concluded.

In addition to policy recommendations for the US, the report also touched on the broader need to improve India’s services trade competitiveness through domestic reforms, including investment in skills, digital infrastructure, and intellectual property frameworks.

Strengthening these foundations, the report suggested, will enhance India’s ability to not only negotiate favorable trade terms but also deliver on them effectively.

The Trade Watch report positions the proposed India‑US services trade agreement as a natural next step in India’s trade strategy, reflecting both global realities and India’s strengths.

As India moves to deepen its integration into global value chains and secure higher‑value economic opportunities, a targeted focus on services trade with key partners like the US will be essential, it concluded.