Article from The Economist: Are Trump’s nationalist policies a curse or a blessing for India?
Last Updated on February 13, 2025 6:48 am
Indian Prime Minister Narendra Modi is going to meet US President Donald Trump. Trump had a good relationship with Modi during his first term. Indians are hoping that this relationship can improve even more in his second term.
But the president Narendra Modi is going to meet this time is a little different. Because he is not bound by the rules as before. Trump’s second term is as likely to put pressure on partners as it is to cooperate with them. So there may be more conflict than Indian diplomats think. Trade is a key issue here. In addition, new tensions may arise over immigration, defense and technology.
The relationship between the two countries is built on bilateral trust. The United States and India need each other to protect each other against China. A deadly border clash between China and India in 2020 pushed Delhi towards Washington. Total trade has doubled in the last decade to reach about $200 billion by 2024. American companies employ 1.7 million workers in India. The US economy is benefiting from the 5 million Indian-American diaspora, 80 percent of whom have college degrees. Indian-origin executives lead companies like Alphabet and Microsoft.
Indians have welcomed Trump’s election victory, with 84 percent of them believing he will be a positive for India, the highest number in any country, according to a survey by the European Council on Foreign Relations, a think tank.
Trump is also reluctant to offer liberal advice on human rights, which has long irritated India’s elite. On February 10, Trump signed an executive order suspending the Foreign Corrupt Practices Act, the law under which billionaire and Modi ally Gautam Adani faced charges in a US court.
Yet America’s ultranationalist stance and desire to attract economic activity within its borders could put pressure on India. India, on the other hand, wants to establish itself as a fully independent ally and a manufacturing base at home.
The main problem is trade. Trump in his first term revoked India’s preferential-trading-partner status, which gave it low or zero-tariff benefits. He also curbed India’s Iranian oil imports through sanctions and raised tariffs on Indian steel and aluminum. Modi is already making concessions to avoid any dispute over trade. India’s budget for February 1 has cut tariffs on a list of products. Indian importers of liquefied natural gas are in talks to buy from US suppliers ahead of Modi’s visit.
There is also tension in the US over illegal immigrants. Thousands of Indians are living in the country illegally. Although the repatriation process has already begun. However, there is widespread criticism within India about the manner in which illegal Indians are being deported. As with trade, Modi has promised to cooperate with the US on this issue. However, political conflict over illegal immigrants could disrupt the legitimate flow, especially for those involved in India’s technology services industry. About 72 percent of the foreigners granted H-1B skilled worker visas from 2022 to 2023 were Indians.
India, on the other hand, is heavily dependent on Russia for its defense equipment. The US has taken various steps to reduce its dependence on Moscow.
Trump is unlikely to help India increase its manufacturing. He has already urged Modi to buy more American equipment. Trump may lose patience with India’s doctrine of engaging with multiple partners. He may also pressure India to strengthen security partnerships with the US, Japan and Australia.
Another important issue is technology. India agrees with America on many fronts. For example, it has taken steps to remove Huawei equipment from Indian telecom networks and has attracted large investments from Amazon, Apple and other Silicon Valley giants.
But India’s ultimate goal is to become a major technology player in its own right. The Modi government wants to raise funds to build an Indian large-scale language model and is subsidizing semiconductor plants. India is mainly focusing on its own digital technology. However, Trump’s nationalist policies may hinder Modi’s ambitions.