By Manoj Kumar and Nikunj Ohri

U.S. President Donald Trump and Indian Prime Minister Narendra Modi shake hands as they attend a joint press conference at the White House in Washington, D.C., U.S., February 13, 2025. REUTERS/Kevin Lamarque//File Photo Purchase Licensing Rights , opens new tab

NEW DELHI, July 31 (Reuters) – India vowed on Thursday to protect its labour-intensive agriculture sector, a central sticking point in bogged-down trade talks with the U.S., as Washington threatened 25% tariffs, triggering outrage from the opposition and a slump in the rupee.

Without a deal, the rate will go into effect from Friday and single out India for harsher trade conditions than its major peers, potentially damaging the economy of a strategic U.S. partner in Asia seen as a counterbalance to Chinese influence.

Though negotiations are continuing, they have hit a wall due to the United States’ insistence that India open its agricultural markets.

New Delhi has long shielded the sector, which – with over 40% of the workforce engaged in farming activities – constitutes the most influential voting bloc in the world’s most populous nation.

“The government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and (medium and small businesses),” India’s trade minister Piyush Goyal said in a statement in the parliament.

U.S. Treasury Secretary Scott Bessent said in a CNBC interview on Thursday that the U.S. trade team was frustrated with India, adding that the future of trade deal between the two nations was now up to India.

U.S. President Donald Trump had said on Wednesday that, in addition to the 25% tariff on imports from India, the country would face an unspecified penalty for its dealings with Russia and its membership in the BRICS grouping of nations.

“I don’t care what India does with Russia,” Trump wrote in a Truth Social post on Thursday. “They can take their dead economies down together, for all I care.”

India’s benchmark equity indices, the Nifty 50 (.NSEI) , opens new tab and BSE Sensex (.BSESN) , opens new tab, fell as much as 0.9% in early trade before paring losses and both closing around 0.4% lower.

The rupee closed 0.2% down at 87.5950 to the dollar after touching its lowest level in more than five months earlier in the day.

COOLING RELATIONS

The government’s failure to clinch an agreement with Trump, even as other major world economies like the European Union, Japan and South Korea have struck deals in recent days, sparked anger among India’s political opposition.

“The government has destroyed our economic policy, has destroyed our defence policy, has destroyed our foreign policy,” opposition leader Rahul Gandhi told reporters on Thursday.

Economists warned the steep tariff could hurt India’s manufacturing ambitions and trim up to 40 basis points off economic growth in the financial year to March 2026. Some doubted whether further negotiations would lead to improved conditions.

“While further trade talks may bring the tariff rate down, it appears unlikely that India will secure a significantly better outcome than its eastern neighbours,” said Priyanka Kishore, an economist at Asia Decoded.

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