4 min readNew DelhiApr 17, 2026 04:24 AM ISTUS Treasury Secretary Scott BessentResponding to two Section 301 investigations launched by the US last month, on “structural excess capacity” and “forced labour”, the government Wednesday told Washington that India’s merchandise export-to-GDP ratio of around 12% reflects a largely domestic demand-driven economy and that its legal framework aligns with the forced labour standards of the International Labour Organisation (ILO).The Section 301 investigation assumes significance for India as US Treasury Secretary Scott Bessent earlier this week said that Trump’s tariffs could be restored by July to the level they were at before the Supreme Court struck them down. While India and the US have agreed to a framework agreement, both trade partners are yet to formally sign the deal.Indian negotiators are going to Washington for talks next week.After facing steep 50% reciprocal tariffs for months before the US Supreme Court declared them illegal, India on Wednesday said that a bilateral trade surplus between the two countries is a macroeconomic phenomenon which is a product of a “number of circumstances”. This assumes significance as US President Donald Trump had primarily targeted India and other countries over the trade deficit while imposing steep tariffs.The Ministry of Commerce and Industry said the US Dollar is the world’s primary reserve currency and is the most commonly used currency for transactions, accounting for 56% of global foreign exchange reserves and that America can borrow money more easily and hence can sustain persistent trade deficits, predominantly due to the US Dollar’s status as the global reserve currency.‘Surplus natural consequence of trade’The USTR had argued that structural excess capacity and production in manufacturing sectors present a serious challenge to America’s efforts to re-shore supply chains and provide good-paying jobs for American workers, and that key trading partners have developed production capacity untethered from the incentives of domestic and global demand.However, India said that trade surplus is a natural consequence of global trade and a byproduct of generalised economic conditions. It is bound to manifest in bilateral trading relationships, and by treating it as a unique condition that allegedly harms US commerce and by initiating investigations under Section 301 of the Act on this premise, the Initiation Notice is effectively challenging the “foundational principles of comparative advantage that underpin international commerce”. “The role of certain non-market economies could be another potential factor. On the other hand, India, which has a significantly smaller trade share with the US in comparison to the other trading partners, cannot be attributed to playing a role in widening the US trade deficit,” the Ministry added.Story continues below this ad‘Indian goods just 3.1% of all US imports’Arguing against charges of overcapacity, India said that its bilateral balance must be viewed in the broader context of India’s overall external account position, development needs, and import profile. India’s goods exports account for only for 3.1% of the total imports into the US.“India’s merchandise export-to-GDP ratio of approximately 12% indicates that production is largely oriented toward meeting domestic demand and that exports constitute a relatively small component of overall economic activity. Across industries specified in the Initiation Notice, India’s manufacturing growth is anchored in domestic demand.More crucially, the USTR’s selective focus on specific sectors in which India happens to have a global trade surplus does not automatically establish that India has “structural excess capacity” in some of the indicated sectors,” the government said in its submission.India has ratified the Forced Labour Convention, 1930 and the Abolition of Forced Labour Convention, 1957, which require the prohibition of forced labour in all forms, it added.Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, specializing in economic policy and financial regulations. With over five years of experience in business journalism, he provides critical coverage of the frameworks that govern India's commercial landscape. Expertise & Focus Areas: Mishra’s reporting concentrates on the intersection of government policy and market operations. His core beats include: Trade & Commerce: Analysis of India's import-export trends, trade agreements, and commercial policies. Banking & Finance: Covering regulatory changes and policy decisions affecting the banking sector. Professional Experience: Prior to joining The Indian Express, Mishra built a robust portfolio working with some of India's leading financial news organizations. His background includes tenures at: Mint CNBC-TV18 This diverse experience across both print and broadcast media has equipped him with a holistic understanding of financial storytelling and news cycles. Find all stories by Ravi Dutta Mishra here ... 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