Why in the News
The downturn in ties between India and the United States (US) reflects a rethink in Washington that may outlive the Trump administration. One side of a debate argues the problem is structural rather than personal. India lacks the leverage, the power to make pressure costly for Washington, to change that course.
What has changed in Washington’s approach?
- What it is: Washington’s moves are a policy shift, not the pressure tactics of one mercurial administration, like a firm changing strategy rather than a manager changing mood.
- Faded hope: Many in India expected strategic convergence, the two sides’ shared security interests, to outlast short term ruptures. The relationship has instead worsened.
- Broad pattern: Washington has pressed India over oil imports, passed a Russia sanctions law, and attacked Indian IT services and the movement of skilled workers. These moves form one pattern.
- Bipartisan support: Many Democrats voted for the Russia sanctions law, so the shift is not confined to one party.
- The takeaway: If the rethink is structural, waiting for a new president will not repair the relationship.
Why has Washington rethought India’s value?
- China plus one stalled: The US sought a friendlier production base besides China to reduce risk. Apart from Apple and a few others, firms have not shifted to India as envisioned.
- AI and outsourcing: Artificial intelligence (AI) cuts the need to outsource to Indian IT firms. The labour cost arbitrage, the saving from cheaper Indian wages that drew outsourcing, will shrink further.
- No chokepoint: India is behind the technology frontier. It controls no chokepoint, a product others cannot easily source elsewhere.
- Industrial policy conflict: Make in India clashes with favouring certain Indian business houses, and this has put off domestic and US firms.
- Insufficient heft: India lacks the economic depth and strategic strength to counterweigh China. Some of its strategic choices have also been at odds with US interests.
Why is special treatment now less likely?
- CAATSA exemption: The US once exempted India from sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA), 2017 for buying Russia’s S-400 missile defence system. Such restraint is now far less likely.
- Transactional framework: Under Trump, US policy works as a deal: every Indian action or inaction draws a US response, sometimes a disproportionate one.
- Domestic policy spillover: Indian rules that discriminate against big American firms now invite retaliation, because the White House is closely aligned with big business and the US has oligarchs too.
- Trade deal calculus: Even a concluded trade deal may not significantly alter Washington’s larger calculus on India.
- Successor administrations: Neither a Vance or Rubio administration nor a left leaning Democratic White House is likely to raise India’s strategic weight.
Challenges
- Triple dependence: India relies on the US for technology, capital and markets, on China for critical inputs and final goods, and on Russia for energy and defence.
- Aspiration gap: The chasm between India’s geopolitical aspirations and its economic capabilities has deepened.
- No leverage: Without a chokepoint, India cannot make Washington weigh the cost of punitive moves.
- Nationalist rhetoric: Calls to nationalism do not change India’s need for all three powers.
Way Forward
- Build essential capabilities: Target a few technologies, such as electronics components, where India can become a supplier others cannot easily replace.
- Neutral industrial policy: Apply Make in India incentives and rules uniformly so no business house is favoured.
- Easier factory investment: Ease land, power and approval bottlenecks so China plus one investment actually arrives.
- Issue based balancing: Manage ties with the US, China and Russia issue by issue under strategic autonomy, the freedom to pick partners without joining a bloc.
Conclusion
The strain in ties reflects India’s limited economic and technological leverage more than one president’s temperament. Whether India builds capabilities that Washington cannot easily do without will decide if the next administration treats it as a partner again.
Back2Basics: CAATSA
- What it does: The US law sanctions countries and entities that make significant transactions with the defence or intelligence sectors of Russia, Iran and North Korea.
- Section 231: This provision targets defence deals with Russia and is the one India’s S-400 purchase attracted.
- Waiver route: The Act lets the US President waive sanctions on national security grounds, which is how a partner can be spared.
Matching Previous Year Question
“[2026] The Chancellor of Germany visited India in January 2026. Which of the following is/are NOT correct in terms of outcomes? 1. MoU between All India Institute of Ayurveda and University of Hamburg 2. MoU on Youth Hockey Development between Hockey India and German Hockey Federation 3. Establishment of a bilateral dialogue mechanism on the Indo-Pacific 4. Opening of an Honorary Consul of Germany in Lucknow (a) 2 and 3 (b) 1 and 4 (c) 3 and 4 (d) 1 only ANSWER: B”
