India-US Trade Deal: Impact on Pharma & IT Sector

A key element in the deal is energy and oil policy: the U.S. stated India would halt its Russian oil imports as part of the negotiations and increase purchases of U.S. petroleum and other energy products (and possibly Venezuelan crude). The removal of the punitive tariff tied to Russian oil was a central component of cutting the overall duty to 18%.

The agreement also reportedly includes a massive purchase commitment from India of over $500 billion in U.S. goods, spanning energy, technology, agricultural products, and more, an indicator of deepening economic linkage.

This shift comes at a time when India’s energy import mix has been evolving: Russian oil accounted for a large share of India’s crude imports in recent years, often at a discount relative to other sources, and was a key factor in negotiating tariff pressures from Washington. Indian refiners may require a transition or “wind-down” period for existing Russian oil contracts, reflecting the complexity of abruptly altering global energy supply lines.

Impact on the Pharmaceutical Sector

Improved Export Economics

India’s pharmaceutical industry is one of the country’s most globally integrated sectors. It supplies a large share of generic medicines and biosimilars to the US, which is a critical export market.

Tariff reduction to 18% improves price competitiveness for Indian producers in the US, especially compared with the situation under the earlier punitive regime, when tariffs had discouraged export growth and created uncertainty.

Nifty Pharma Index Jumped Over 4.5%

Indian pharma stocks rallied immediately after the deal, reflecting renewed investor confidence that tariff-related drag will ease and export demand may recover. The Nifty Pharma index jumped over 4.5% to an intraday high. The constituents of index Auro Pharma, Sun Pharma & Divis Lab was top gainers.

Supply Chain & Competitiveness Considerations

Though Indian pharma has historically been somewhat resilient to tariffs, in part due to the inelastic demand for essential generics in the US market, high tariffs raise the cost of medicines, potentially impacting margin structures for drugmakers and out-of-pocket costs for US consumers.

Before the deal, reports indicated that any tariff imposition had the potential to disrupt cost advantages held by Indian manufacturers, with companies like Sun Pharma, Dr. Reddy’s, Cipla, and Biocon deriving a significant share of revenue from the US market.

The tariff rollback thus mitigates that risk and may support long-term export contracts, production planning, and investment in capacity expansion.

Competitive Advantage Over Peers

With the 18% tariff in place, Indian pharma firms now face a more predictable and favorable trade regime compared to past uncertainty, allowing them to compete effectively against peers in regions like Southeast Asia, where US tariff rates have been relatively higher.

Impact on the Information Technology (IT) Sector

Services Sector Resilience

Unlike manufactured goods, IT services and software exports are not directly subject to customs tariffs. However, trade deals and tariff environments influence business confidence, investment decisions, and contract flows between countries.

The new trade framework is widely seen as a confidence booster for India’s IT sector, even if direct tariff impacts are limited. IT, AI services, and engineering services are key service domains likely to benefit from enhanced bilateral cooperation.

Nifty IT Index Jumped Over 5.5%

The tariff agreement reduces policy uncertainty between the US and India. For Indian IT companies, which generate a considerable share of revenue from US clients, this clarity supports long-term contract renewals and new business wins. In the early trade of Tuesday Nifty IT index jumped over 5.5% with its constituents Coforge, Mphasis & Persistent Systems being the top gainers of the index.

Indirect Benefits Through Macroeconomic Confidence

Improvements in broader investor sentiment, equity market performance, and the strengthening of the Indian rupee following the tariff cut can have positive spillovers for IT firms, especially those listed on stock exchanges or with significant foreign ownership.

Additionally, as global investors rotate back to India, IT companies, which are major components of indices like the Nifty 50, stand to benefit from renewed portfolio inflows.

Sector Challenges & Outlook

Pharma Sector Risks

Despite the tariff rollback, the pharma sector still faces:

• Margin pressures due to thin pricing in generics,
• The need to diversify markets beyond the US in case of future policy shifts,
• Regulatory & compliance costs for entry and continued participation in the US market.

IT Sector Dynamics

For IT services:

• The direct tariff impact remains minimal,
• But policy certainty and closer bilateral ties enhance prospects for deeper collaboration in cloud computing, AI, digital infrastructure, and outsourcing.

Conclusion

The India-US trade deal, culminating in the reduction of US tariffs from punitive levels to 18%, provides a welcome relief to major export-oriented sectors, particularly pharmaceuticals and IT services.

For pharma, the deal restores market competitiveness, eases investor concerns, and supports stock valuations after a period of policy uncertainty. For IT, the agreement reinforces business confidence and sets the stage for deeper engagement in a globally strategic market.

Overall, the trade deal signals improving economic ties between the two democracies, with positive implications for growth, investment, and market sentiment across both sectors, laying a foundation not just for recovery but long-term expansion in US-India economic relations.