India Scraps Digital Tax, Pledges $500 Billion in U.S. Purchases
Synopsis
A major geopolitical trade shift is underway as India and the United States finalise a new “interim” trade deal. The agreement will see India repeal its controversial tax on American digital services and commit to purchasing $500 billion in U.S. goods over the next five years. In return, Washington is cutting steep tariffs on Indian exports such as textiles and chemicals, easing trade tensions and aligning both countries against unfair global economic practices.
WASHINGTON / NEW DELHI — India has struck a historic agreement with the United States that will scrap its digital services tax and see New Delhi buy $500 billion worth of American goods over the next five years. The White House confirmed the final terms on Monday, February 9, 2026, marking a significant easing of trade friction between the two economic powers.
The pact forms part of a broader interim trade framework aimed at correcting long-standing imbalances. In a major win for U.S. technology firms, India will end its special levy on digital services provided by American companies. In exchange, the United States is slashing its reciprocal tariffs on a wide range of Indian exports, rates from as high as 50% down to 18%.
The $500 Billion Shopping List
India’s pledge to purchase half a trillion dollars’ worth of U.S. goods ranks among the largest trade commitments in recent history. The buying plan focuses heavily on energy, infrastructure, and advanced technology to support India’s fast-growing economy while creating jobs in the United States.
Key areas include:
- Large-scale imports of U.S. oil, natural gas, and coking coal.
- Aviation: Thousands of orders for American-made aircraft and components.
- Technology: High-end hardware such as GPUs and equipment for data centres.
- Agriculture: Lower barriers for U.S. tree nuts, fresh fruit, soybean oil, and spirits including bourbon and whiskey.
Commerce Minister Piyush Goyal called the $500 billion target “conservative,” noting that as India pushes toward a $30 trillion economy, its demand for American energy and technology will only expand.
Ending the “Digital Tax” Dispute
For years, Washington has criticised India’s Equalisation Levy, which taxes digital advertising and e-commerce services offered by foreign tech giants. U.S. officials argued the measure unfairly targeted companies such as Google, Amazon, and Meta.
By scrapping the tax, India is clearing the path for new bilateral digital trade rules and is expected to attract more U.S. investment into its technology sector. In return, the United States is easing restrictions on Indian IT exports, improving access for Indian engineers and software firms to the U.S. market.
Aligning Against Third-Party Pressure
One of the most strategic elements of the deal lies beyond trade volumes. India has agreed to halt imports of Russian oil, a key demand from the Trump administration, aligning New Delhi more closely with U.S. foreign policy and security goals.
Both countries also pledged to cooperate against so-called non-market trade practices by third parties, widely seen as a reference to China. By strengthening supply chains between the U.S. and India, the two nations aim to reduce reliance on Chinese manufacturing. For India, the new 18% tariff rate offers a competitive edge over regional rivals such as Vietnam and Thailand, potentially shifting thousands of manufacturing jobs to Indian factories.
Key Highlights
- India will scrap its digital services tax on U.S. technology companies.
- New Delhi will buy $500 billion in American energy, aircraft, and technology over five years.
- The U.S. will cut tariffs on Indian goods from 50% to 18%.
- India has agreed to stop importing Russian oil as part of the alignment.
- The deal opens access to a $30 trillion U.S. market for Indian exporters.
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