On February 2, 2026, Donald Trump and Narendra Modi announced a sweeping India–US trade agreement that ends nearly a year of tariff escalation and policy friction between the two economies. For Indian exporters, corporate planners, and global investors, the announcement removed a persistent macro overhang that had clouded earnings visibility and dulled risk appetite across markets.

At the heart of the agreement is an immediate reduction in the US reciprocal tariff on Indian goods from 25% to 18%, alongside the withdrawal of the additional 25% punitive levy imposed in August 2025. That levy had been linked to India’s continued purchase of Russian crude oil. As part of the reset, India will cease buying Russian oil and pivot toward a large, multi-year procurement framework from the United States spanning energy, technology, and agricultural products, with cumulative purchases expected to exceed $500 billion. In exchange, India will progressively lower tariffs and non-tariff barriers on select US goods, signalling a calibrated market opening rather than blanket liberalisation.

Financial markets interpreted the development as a structural positive rather than a political headline. The Nifty 50 surged nearly 5% intraday, the Sensex rallied over 3,600 points, and the rupee strengthened meaningfully as expectations built around renewed foreign institutional flows and improved trade predictability. This was a classic compression of risk premium: the removal of uncertainty that had weighed on valuations for months.

From a macroeconomic lens, the transmission channels are straightforward. Smoother export flows, higher capacity utilisation in labour-intensive sectors, improved working capital cycles, and reduced trade friction costs together create conditions for stronger growth momentum. India’s Chief Economic Adviser indicated that the deal could lift FY27 GDP growth toward 7.4% if export normalisation sustains. Investors appear to be pricing in the likelihood of earnings upgrades across export-oriented sectors rather than merely celebrating sentiment repair.

The most immediate beneficiaries are labour-intensive export industries where US demand is pivotal and tariff sensitivity is high.

Textiles, apparel, leather, and seafood exporters were among the worst hit during the tariff phase, as elevated duties eroded pricing parity against China and Vietnam in US retail supply chains. With tariffs lowered, Indian suppliers regain competitiveness, which could translate into stronger order flows, better plant utilisation, and margin normalisation over the coming quarters. Listed companies with high US exposure such as Indo Count Industries, Kitex Garments, Gokaldas Exports, Pearl Global Industries, Welspun India, and Himatsingka Seide are positioned to see faster volume recovery if US buying cycles normalise.

Food and consumer exporters with meaningful US presence may experience a more gradual but durable tailwind. Companies such as LT Foods, KRBL, and Tata Consumer Products are less sensitive to tariff swings but stand to benefit from smoother trade logistics, shelf stability, and renewed buyer confidence.

In chemicals and agrochemicals, the primary benefit lies in demand visibility. Exporters including UPL, SRF, and Jubilant Ingrevia could see fewer order deferrals from US customers and improved planning clarity in specialty segments.

The agreement is not without trade-offs. India’s commitment to large-scale US energy purchases increases exposure to global fossil fuel price cycles and raises policy complexity for domestic energy substitution and transition goals. Lower barriers for select US agricultural goods could also create competitive pressure in specific agri value chains, potentially weighing on pricing power for some domestic producers once product categories are clarified. Moreover, with Russian crude out of the mix, India’s oil basket becomes more sensitive to global benchmarks, which could transmit volatility into logistics, aviation, and downstream manufacturing if prices spike.

Beyond sectoral implications, a critical but less visible beneficiary is capital flow dynamics. The deal signals tighter geopolitical alignment with the US, an important consideration for global allocators assessing country risk. Expectations of revived FII participation in both equities and debt markets strengthened alongside the rupee, underscoring how trade certainty feeds directly into asset pricing.

Taken together, the India–US trade agreement represents a meaningful shift from confrontation to cooperation with tangible economic consequences. It removes a year-long uncertainty that had distorted export competitiveness, clouded corporate guidance, and elevated India’s macro risk perception. While energy sourcing and selective market access present nuanced challenges, the net effect is clearly positive for exports, earnings visibility, growth expectations, and capital flows. For markets, the message is unambiguous: the tariff overhang has lifted, and with it, a key constraint on India’s external trade outlook.