Labour codes, QCO reforms and Budget push: How India strengthened its economy ahead of US trade deal
As India and the United States worked through months of intense negotiations to finalise a bilateral trade deal, New Delhi was simultaneously rolling out a series of domestic reforms aimed at making the Indian economy more resilient, competitive and future-ready. From labour law reforms and selective easing of quality regulations to targeted support for export-driven sectors in the Union Budget, these steps formed the backdrop against which the India–US trade agreement eventually took shape.
Context: Parallel tracks of diplomacy and domestic reform
The announcement of the India–US trade deal came late Monday when Donald Trump said that Prime Minister Narendra Modi had agreed during a phone call to stop buying Russian oil. While the Indian government has not used the term “trade deal” explicitly, Modi publicly thanked the US President for announcing a reduction in tariffs, calling it a positive development for India’s 1.4 billion people.
Under the agreement, overall levies on several Indian goods are set to fall sharply, from as high as 50 per cent to around 18 per cent. These tariffs were originally imposed by the US in August last year in two phases—an initial 25 per cent duty followed by additional penalties linked to India’s energy imports from Russia.
Senior members of the Union government, including home minister Amit Shah, have confirmed that the deal is the result of sustained engagement over many months, involving high-level meetings in New Delhi and Washington as well as direct conversations between the two leaders.
Budget push to protect export-driven sectors
One of the most visible policy signals ahead of the trade agreement came through the Union Budget, which placed renewed emphasis on labour-intensive export sectors. Industries such as textiles, seafood, footwear and leather goods—areas particularly vulnerable to higher US tariffs—received targeted support to improve their global competitiveness.
The impact of earlier US levies was already visible in export data. After tariffs were imposed in August, India’s exports of fish and other aquatic invertebrates declined by 9.2 per cent on an annualised basis. Knitted apparel exports also slipped by nearly 3.9 per cent, falling to about $1.70 billion.
Finance minister Nirmala Sitharaman announced key duty relief measures to help exporters recover lost ground. She proposed raising the limit for duty-free imports of specified inputs used in seafood processing from 1 per cent to 3 per cent of the previous year’s export turnover. Similar benefits were extended to shoe uppers, which were brought under the duty-free import regime already available to leather and synthetic footwear.
Commerce and industry minister Piyush Goyal described the Budget as one focused on “future-ready Bharat,” arguing that it would accelerate manufacturing growth, boost exports and position India as a trusted global economic partner.
Labour codes signal long-pending structural reform
Another major step taken ahead of the trade deal was the rollout of India’s four labour codes in November last year. These include the Code on Wages (2019), the Industrial Relations Code (2020), the Code on Social Security (2020), and the Occupational Safety, Health and Working Conditions Code (2020).
By consolidating 29 existing labour laws into four comprehensive codes, the government aimed to modernise regulations that largely dated back to the pre-Independence and early post-Independence period. Officials argued that outdated frameworks no longer reflected the realities of a globalised economy and a rapidly changing world of work.
From a trade perspective, labour standards, regulatory clarity and workforce flexibility often feature in negotiations with developed economies. While the labour codes were framed primarily as domestic reforms under the broader vision of Aatmanirbhar Bharat, they also addressed long-standing concerns raised by international investors and trading partners, including the US.
Quality Control Orders and trade sensitivities
Quality Control Orders, or QCOs, formed another important piece of the policy puzzle. QCOs mandate compliance with Indian standards for specific products, a move the government says is designed to protect consumers, improve product quality and support domestic manufacturing.
However, trading partners such as the US have frequently viewed the rapid or stringent introduction of QCOs as potential non-tariff barriers that raise compliance costs and restrict market access. These concerns often surface during trade discussions, even when they are not formally written into agreements.
In a notable move to support the textile sector—one of the worst hit by US tariffs—the ministry of chemicals and fertilisers in November 2025 rescinded 14 QCOs with immediate effect. These included standards related to polyester fibre and polyester yarn, easing compliance requirements for manufacturers and exporters.
While QCO relaxations are not explicit clauses in bilateral trade deals, their timing can influence the broader negotiating environment and help smooth trade flows.
Analysis: Building resilience alongside negotiation
Taken together, the Budget incentives, labour reforms and calibrated approach to QCOs point to a strategy that went beyond short-term tariff relief. Instead of relying solely on diplomatic negotiations, India focused on strengthening domestic fundamentals to withstand external shocks.
By improving export competitiveness, modernising labour regulations and addressing trade-related frictions, New Delhi positioned itself as a more reliable and adaptable partner. These measures also sent signals to global investors that India was serious about reform, even as it defended its strategic and economic interests.
Conclusion
While the full details of the India–US trade deal are yet to be formally released by the Indian government, the sequence of domestic reforms suggests that economic resilience was a central priority in the run-up to the agreement. From Budget-led export support to long-pending labour reforms and selective easing of quality norms, India’s approach combined internal strengthening with external engagement. As trade dynamics evolve, these measures could play a crucial role in shaping India’s long-term position in the global economy.
Final Thoughts from TheTrendingPeople
The India–US trade deal did not emerge in isolation. It was preceded by a series of calculated domestic policy moves that aimed to future-proof the Indian economy while addressing long-standing trade sensitivities. By aligning internal reforms with external negotiations, New Delhi appears to have pursued a strategy that balances sovereignty with global integration. Whether this approach delivers sustained gains will depend on how effectively these reforms are implemented on the ground.
