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India-U.S. Strengthening Ties
Context:
In a significant step toward deepening bilateral relations, India and the United States have agreed to negotiate the first segment of a trade agreement by the autumn of 2025.
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- This development came during Prime Minister Narendra Modi’s visit to Washington, where he met with U.S. President Donald Trump for extensive bilateral discussions.
- The talks, which lasted around four hours, covered a wide range of topics, including trade, defence, energy, technology, and multilateral cooperation.
Addressing the Deficit
- One of the key focuses of the discussions was addressing the U.S. trade deficit with India.
- President Trump highlighted India’s tariffs as “unfair” and a “problem,” but the two leaders agreed to work toward reducing the deficit.
- India plans to increase its energy purchases from the U.S., particularly oil and gas, to help balance trade.
- Prime Minister Modi emphasised the importance of announcing plans to jointly build U.S.-designed nuclear reactors in India under the U.S.-India 123 Civil Nuclear Agreement.
- The U.S. also affirmed its support for India’s full membership in the International Energy Agency.
Defense Cooperation
- In the defence sector, the U.S. is paving the way to provide India with F-35 stealth fighters, marking a significant upgrade in India’s military capabilities.
- The two nations also announced a decade-long framework to deepen defence cooperation, which includes the procurement of six additional P-8I Maritime Patrol aircraft for surveillance in the Indian Ocean Region.
- Additionally, the U.S. and India will reopen negotiations for a Reciprocal Defense Procurement (RDP) agreement to align their procurement systems and reconsider arms transfer regimes.
- The U.S. will also review its International Traffic in Arms Regulations (ITAR) to facilitate the transfer of military technology to India.
Technology and Critical Minerals
- A major highlight of the visit was the announcement of the Transforming the Relationship Utilising Strategic Technology (TRUST) initiative, which replaces the earlier Initiative on Critical and Emerging Technology (ICET).
- TRUST aims to enhance cooperation in critical and emerging technologies, including artificial intelligence, semiconductors, quantum computing, biotechnology, and space.
- Under TRUST, the two countries will focus on creating robust supply chains for critical minerals like lithium and rare earth elements (REEs), which are essential for defence, energy, and technology sectors.
- This initiative builds on India’s recent induction into the U.S.-led Minerals Security Partnership (MSP) and aligns with India’s National Critical Minerals Mission, which has a budgetary outlay of Rs 16,300 crore over seven years.
A New Challenge
- President Trump’s announcement of reciprocal tariffs has added a new dimension to global trade dynamics.
- Under this policy, the U.S. will impose tariffs on imports equivalent to those charged by other countries on U.S. exports.
- This move could significantly impact India, which currently levies higher tariffs on certain goods to protect its domestic industries.
- While India is expected to increase its purchases of U.S. goods, including defence equipment and energy, to balance trade, the imposition of reciprocal tariffs could weaken the Indian rupee and affect domestic industries.
- The U.S. Trade Department is expected to finalise the details of these tariffs by April 2025.
Multilateral Cooperation and Regional Initiatives
- In addition to bilateral agreements, the two nations reaffirmed their commitment to multilateral partnerships, including the Quad (India, U.S., Japan, and Australia) and the India-Middle East-Europe Corridor (IMEC).
- They also plan to convene the I2U2 (India, Israel, U.S., and UAE) group within six months to announce new initiatives.
- The leaders recognised the need to build new plurilateral partnerships in the Western Indian Ocean, Middle East, and Indo-Pacific regions to enhance cooperation in defence, technology, energy, and critical minerals.
The agreements and initiatives underscore the growing strategic partnership between India and the U.S. in the 21st century. However, the implementation of reciprocal tariffs and their impact on India’s economy remains a critical issue to watch. As India strives to become a developed nation by 2047, its partnership with the U.S. will play a pivotal role in shaping its economic and technological future.
