17

Feb

Modi’s U.S. Visit:  Rhetoric Galore But Real Gains Uncertain

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Prof Shivaji Sarkar

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New Delhi | Monday | 17 February 2025

Prime Minister Narendra Modi’s visit has been subjected to many US machinations. While some issues like the crude and gas imports may fructify for the time being, it needs to be seen as to what happens to other strategic US offers. Tariffs and illegal immigration, however, remain the most uncomfortable issues to be resolved.

Ahead of Prime Minister Narendra Modi’s 36-hour visit to Washington, Trump signed revised global tariff regulations. At a joint press conference with Modi, he aimed India’s high tariffs, vowing to impose reciprocal import taxes. “Whatever India charges, we charge them. So frankly, it no longer matters to us that much what they charge,” Trump stated, underscoring his hardline approach to trade negotiations.

Modi nodded to it, saying, “One thing that I deeply appreciate, and I learn from President Trump, is that he keeps the national interest supreme”, Modi said. “Like him, I also keep the national interest of India at the top of everything else”.

India is set to strengthen economic ties with the U.S. through a massive $500 billion purchase deal, securing crude oil, advanced weaponry—including the controversial F-35 stealth fighters—and tariff adjustments to align with U.S. trade demands. This move comes as President Donald Trump, known for his tough stance on trade, agrees to the deal, making India the fourth country reportedly offered the F-35 after Israel, South Korea, and Singapore. Developed at a staggering cost of $1.17 trillion, the F-35’s potential induction into India’s arsenal raises concerns about its impact on the country’s Atma Nirbhar Bharat initiative.

 

Article at a Glance
Prime Minister Narendra Modi's recent visit to the U.S. has highlighted complex trade and strategic issues, particularly regarding tariffs and illegal immigration. Ahead of the visit, President Trump signed revised global tariff regulations, criticizing India's high tariffs and promising reciprocal import taxes.
Modi acknowledged Trump's focus on national interests, while India aims to strengthen economic ties through a $500 billion deal that includes crude oil and advanced weaponry, such as the controversial F-35 fighter jets. However, Indian strategists express concerns about the F-35's suitability for high-intensity operations.
Additionally, India is increasing its petroleum purchases from the U.S. to $25 billion, despite ongoing ties with Russia for energy supplies. The tariff negotiations are expected to be challenging, with potential impacts on Indian industries. Overall, the benefits of Modi's visit remain uncertain, particularly regarding the F-35 offer and the resolution of tariff issues.

 

India’s indigenous LCA program has faced setbacks due to delays in U.S. engine supplies. The F-35, a single-engine fighter, may not be optimal for high-intensity operations against adversaries like China or Pakistan. Meanwhile, Russia has offered the Su-57 Felon under an accelerated Make-in-India proposal, with production potentially commencing by year-end.

Indian strategists are not confident with the highly expensive single-engine F-35. India and the United States signed a deal to import 31 Predator drones from General Atomics in October 2024. The deal is valued at around $4 billion and is intended to improve India's surveillance capabilities.

According to the US Congressional Research Service, New Delhi is expected to spend more than $200bn over the next decade to modernise its military. Its strategic planners want to replace Russia, which till now remains the topmost arms supplier.

Prime Minister Modi opened up his kitty for petroleum purchases to $ 25 billion from the current $ 15 billion to help Trump push significantly increase US oil production and even exports, for which he employed the slogan “Drill, baby, drill”. In November, S&P Global Commodity Insights (SPGCI) said that it expected Asian oil buyers, including India, to witness significantly more opportunities to import “attractively priced crude from the US” as its competition with the OPEC (Organization of the Petroleum Exporting Countries) suppliers intensifies.

Business giant Trump categorically says, “Washington hopes to become top oil and gas supplier to New Delhi”. In simple terms, India has to give up the choice of a closer and more convenient market, like West Asia. Saudi Arabia remains India’s third largest petroleum supplier, with 39.5 MMT.  Iran was shut down years ago under the US sanctions. It’s not yet clear how it would impinge on Russian oil purchases that bolstered the profits of the country’s two giant private refiners.

India has continued its ties with Russia as it carries out its war with Ukraine. India has remained a major consumer of Russian energy, while the West has cut down its consumption since the war started.

According to India’s official trade data, in January-November of 2024, India imported 7.2 million tonnes of oil from the US, which accounted for 3.2 per cent of New Delhi’s overall oil imports. Russia is currently India’s top oil supplier, followed by Iraq, Saudi Arabia, the United Arab Emirates, and the US. As for LNG, India imported 5.12 million tonnes from the US in January-November 2024, accounting for 20.2 per cent of India’s overall LNG imports for the period.

Higher freight, while also a factor in importing light natural gas (LNG) from the US, is stated to be compensated by American gas priced at a discount, and the landed price would be lower than West Asian imports.

India, being a very heavy energy consumer, is now eyeing nuclear energy due to the low carbon source of base power generation. Except for usual rhetorics, not much concrete has emerged, though India has been talking with Westinghouse for a reactor.

 There is another issue. During the recent Israel-Gaza-Houthi (Yemen) -Hezbollah (Lebanon)- war, India’s DAP fertiliser imports had to detour the African continent, adding to its prices, longer travel and supply delays. It also hampered the India-Middle East-Europe Corridor (IMEEC), aiming to integrate India, Europe, and the Middle East through UAE, Saudi Arabia, Jordan, Israel and the European Union being built by an Indian business house, which has taken over Israel’s Haifa port. These problems may multiply.

 

Tariff levelling is a complex process. It’s just not the import duties. It also demands a review of concessions and other facilities for domestic industries. It may impact Indian industrial production, or it has to rejig production expenses to help America pay a low tariff, which Trump says the US charges from its importers. It demolishes barriers and opens up the markets to pouring US goods. Trump is certainly not happy with India’s budgetary duty cuts from 70 per cent on Harley Davidson bikes to 30 per cent or cuts on lithium-ion batteries. Electric vehicles are no longer his priority.                    

“Tariff”, says Richard Rossow, head of the India program at the Centre for Strategic and International Studies, “is going to be a boxing match. India is willing to take a few hits, but there's a limit.” The U.S. has a $45.6 billion trade deficit with India. Overall, the U.S. trade-weighted average tariff rate has been about 2.2 per cent, according to World Trade Organization data, compared with India's 12 per cent, though the US says it’s much more.

None clarified whether certain issues like summonses against some Indian dignitaries were resolved or not.

In conclusion, it can be said that despite all the hype, the gains to India from Modi’s visits are not very clear. The F-35 offer would likely go through deep scrutiny. India had not approached the US for this aircraft, but has come as an offer during Modi’s visit. The tariff would remain an issue along with US concern for selling more petroleum crude.

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