The apparent lurch towards China is only meant to put psychological pressure on Washington to respect India’s geopolitical sensitivities and domestic compulsions.
Presently, India-US relations do appear to be in tatters due to President Donald Trump’s tariffs and invectives against New Delhi. But before long, the relationship is likely to be restored, given the fact that the economic and geopolitical strands tying the two nations are compelling and strong.
New Delhi’s apparent lurch towards China in recent weeks is at most a diversionary move to mount psychological pressure on the US to respect India’s geopolitical sensitivities and take into account the domestic economic and political compulsions that Prime Minister Narendra Modi faces.
The unstated hope in India is that Washington will, in due course, be compelled to come round to accepting India’s position.
To be sure, Indians have expressed strong feelings about the way President Trump has dealt with India. He has said that India’s economy is “dead”, that it is a bad place to invest, and that it lost seven jets in the May war against Pakistan.
The latest insult has been the naming of 38-year-old and inexperienced Sergio Gor as US Ambassador with concurrent charge of South and Central Asia as Assistant Secretary of State for South and Central Asia. Gor’s appointment has nullified the traditional primacy and exclusivity that India had enjoyed in Washington.
As if hyphenation with Pakistan was not enough, Trump has hyphenated India with a series of small countries in South and Central Asia. It is like rubbing salt into the wound that Trump’s 50% tariff has inflicted on India.
Befriending China
Smarting under Trump’s unprecedented insults, India lurched towards China, its long-standing tormentor and geopolitical rival, in search of solace and hopes of some economic succour.
In that context, Prime Minister Modi’s decision to attend the summit of the Shanghai Cooperation Organization (SCO) in Tianjin on 31 August and 1 September was hailed as a “masterstroke” by the pro-government Indian media. The media declared that Indo-US relations were in a shambles, and that India had at long last returned to the time-tested policy of non-alignment to restore its dignity.
But perceptive observers have pointed out that the lurch towards China would yield no results given Beijing’s territorial claims on India, its iron-clad ties with Pakistan, and its one-sided trade with India. India has a US$100 billion trade deficit with China with no possibility of its being narrowed. And during the May war with Pakistan, Chinese technology helped Pakistan bring down Indian jets.
Prime Minister Modi is not unaware of the problems with China. That is why he has decided to skip the military parade in Beijing on 3 September that would mark China’s victory over Japan 80 years ago.
Visit to Japan
Japan has been critical of the Chinese celebration of the war victory. Therefore, Modi would not be endearing himself to Xi Jinping by visiting Japan on 30 August, before coming to Tianjin for the SCO summit. And in Tokyo, Modi is expected to discuss QUAD’s projects with his Japanese counterpart, Ishiba Shigeru.
Commitment to QUAD
China’s bitterness will be accentuated by New Delhi’s latest announcement reiterating its commitment to the QUAD. Days before Modi was to travel to China, India and the US met in a virtual format to reinforce their military cooperation, thus further reducing the impact of Modi’s overtures to Xi Jinping.
On 26 August, Indian Foreign Secretary Vikram Misri described QUAD as an “important platform” for Indo-Pacific stability.
“You’re aware that the Quad is indeed an important platform for working on and promoting peace, stability, prosperity and development in the Indo-Pacific region,” he said.
“QUAD has broadened its scope in recent years to include health security, critical and emerging technologies, critical minerals, resilient supply chains and infrastructure development, in which India is deeply interested. Both India and the US attach high value to this forum and to this partnership. We look forward to working with all QUAD partners to take our cooperation forward,” he added.
During his February visit to Washington, Modi had told US President Trump that he looked forward to welcoming him in Delhi for the QUAD summit.
Ten-Year Indo-US Defence Partnership
India recently held a crucial 2+2 defence-related consultation, albeit virtually. The Indian and US readouts after the virtual meeting stated that both sides looked forward to signing the new ten-year framework for a “Major Defence Partnership.”
The two sides also stated that they wanted to continue “enhancing the breadth and depth of the bilateral relationship in a manner that benefits the people of India and the United States.”
They mentioned progress made “under the auspices of the US-India COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century and beyond.”
India Can’t Reject US
Realistically speaking, India is in no position to abandon the US and cast its lot with China instead. India’s trade is heavily dependent on the US market. The US is the only major country with which India enjoys a trade surplus.
India’s dependence on the US is reflected in the impact of Trump’s 50% tariff on its economy. According to the Financial Times, Trump’s tariffs threaten India’s US$87 billion exports to the US. Trade with the US is 18% of its total exports and more than 2% of its GDP.
Indian industry experts warn of a 40 to 50% reduction in shipments to the US, especially from labour-intensive sectors such as textiles, jewellery and automobiles. Small and medium-sized industries face a crisis in competitiveness, while GDP growth forecasts have been revised down by as much as 1%. The textile and gem sectors have announced closures.
And the immediate market impact is acute: a weaker rupee, risk of imported inflation, an exodus of foreign portfolio investors, and rising borrowing costs for foreign currency, Financial Times added.
If Trump extends tariffs to pharmaceuticals, services and electronic goods, the damage will be much more. Services account for 60% of India’s earnings from exports to the US.
Need to Mend Fences
Taking all aspects into account, many Indian experts advise India to resume trade talks with the US but with a give-and-take approach. India may not agree to buy expensive fighter jets from the US, but it can lower tariffs on some items. It could even throw open some agricultural products to US imports that would not affect the bulk of India’s farmers. The US could be invited to invest in Indian agricultural development, said Dr Raghuram Rajan.
India should abandon grandstanding on any issue and substitute the hectoring and megaphone diplomacy pursued in the last 10 years with quiet and persistent diplomacy aimed at finding common ground rather than sharpening differences to gain brownie points, whether at home or abroad.
All is not Lost
However, India-US ties are expected to come back to normal, sooner rather than later. This is evident in the decision to stick to the anti-China QUAD.
The accommodative sentiment is reciprocated by top officials in the State Department. Treasury Secretary Scott Bessent recently said that though the US-India relationship is “complicated”, at the end of the day, the US and India “will come together.”
On the status of the trade deal, Bessent noted that India’s stance in the talks was “performative”. Elaborating, he said: “I do think India’s the world largest democracy; the US is the world’s largest economy. I think at the end of the day we will come together. I think a lot of it by the Indians has been performative. I’ve said it all along during the tariff negotiations. The US is the deficit country. When there is a schism in trade relations, the deficit country (is) at an advantage. It’s the surplus country that should worry. So, the Indians are selling to us. They have very high tariffs and we have a very large deficit with them.”
Indian Commerce Ministry officials said that the communication lines with the US have not been severed and that the ministry is exploring all possibilities to soften the impact of the tariffs.
Domestic Compulsions
Modi’s tough stand in the trade talks with the US and India’s rejection of US claims about the war with Pakistan could well be attributed to political needs arising from the upcoming State Assembly elections in Bihar, which is a big State in the politically important “Hindi-belt” in North India.
Modi’s strong stand against giving any concessions to the US in India’s farm and dairy sectors is due to the need to keep rural electors on his side.
But, to the extent possible, Modi has already opened the market to American products. Tariff on US cotton has been suspended till 30 September, providing relief to the country’s garment industry, which has been hit hard by a 50% US tariff. If talks with the US are resumed, India could reduce tariffs on some more agricultural products such as soya bean.
All in all, in the coming months, India would make efforts to stay with the US while straining every nerve to ensure that its domestic electoral constituency is safeguarded. The dalliance with China may just be a tactical move to put psychological pressure on the US to give India its due status in South Asia, its legitimate sphere of influence.