India–US trade needs structural clarity

THE India–United States trade relationship stands at an inflection point. Much has been achieved, but the next phase will require clarity, structure and political consistency. With global supply chains being reorganised and geopolitical competition reshaping trade diplomacy, both nations are looking to deepen economic engagement while preserving strategic autonomy. Trade has expanded dramatically, dialogue has intensified and political signalling remains strong. Yet, beneath the momentum lie unresolved tensions. Addressing them thoughtfully is essential if this partnership is to shift from opportunity to architecture.

Bilateral trade between the two nations has more than doubled in a decade, now crossing USD 190 billion, making the United States India’s largest trading partner. That alone marks a significant shift in the economic ordering of the Indo-Pacific. There is expanding alignment in strategic sectors — defence, semiconductors, digital services, energy and advanced manufacturing. But there is also friction. The challenge, therefore, is not whether the partnership has value, but whether it can evolve coherently enough to deliver enduring benefits on both sides.

The recent diplomatic tone emerging from Washington has been notably positive. US President Donald Trump, during the swearing-in ceremony of Sergio Gor as the next ambassador to India, stated that the United States is “pretty close” to finalising a trade agreement with New Delhi. He called India one of America’s most important international relationships and emphasised his “fantastic” working relationship with Prime Minister Narendra Modi. Gor, who has been one of Trump’s closest aides and is now the youngest US ambassador to India, pledged to strengthen ties further. These public remarks matter. They signal that political capital exists to push negotiations forward.

Yet ambitious rhetoric must now give way to structural clarity. India’s Commerce Secretary Rajesh Agrawal has confirmed that talks are progressing on two tracks — a broad bilateral trade agreement and a more immediate framework deal aimed at resolving tariff disputes. He believes the framework agreement could even be announced within the year, but notes that a political decision will be required to find the “right landing zone”. He also emphasised that trade and FDI must be treated as interconnected pillars of economic cooperation rather than separate tracks.

Indeed, progress in recent years shows what is possible with political will. Longstanding disputes on poultry, solar exports and retaliatory tariffs have been resolved. The revival of the Trade Policy Forum has restored a platform for structured dialogue. The Initiative on Critical and Emerging Technology, or iCET, signals a broader shift towards cooperation in cutting-edge fields such as AI, semiconductors, space technology and advanced defence manufacturing. These developments represent a movement away from a purely transactional trade dynamic and toward a strategic economic partnership.

However, several sticking points continue to complicate negotiations. The US still raises concerns over India’s tariffs on ICT products, dairy imports and certain medical equipment. India remains affected by US duties on steel and aluminium. Debates over digital trade also persist. Washington champions unrestricted cross-border data flows as essential to innovation and market access. India maintains that data sovereignty and regulatory oversight are legitimate policy objectives. This need not be a zero-sum debate; it requires structured frameworks, regulatory safeguards and shared standards.

Pharmaceutical policy highlights another tension. US companies argue that India’s price caps on medical devices and generics limit innovation. India counters that public health affordability must remain central to policy, particularly in a country of India’s scale and demographic complexity. The debate sits at the intersection of ethics, economics and intellectual property — and such issues tend to evolve slowly, requiring patient dialogue rather than rapid concessions.

Green technology has introduced yet another layer of complexity. The US Inflation Reduction Act offers strong subsidies to domestic companies across the electric vehicle, battery and solar manufacturing sectors. India has expressed concern that such incentive schemes could crowd out emerging economies and distort competition. Yet there is also acknowledgement that shared research, co-investment and common standards could transform green technology from a friction point into an avenue of partnership.

The momentum for collaboration is visible in several sectors. Energy trade has expanded rapidly, with India importing record volumes of US LNG. American technology firms are expanding manufacturing in India under Production Linked Incentive schemes. Indian IT and digital firms continue to play a central role supporting US businesses across finance, healthcare, telecommunications and logistics. Slowly but steadily, the relationship is moving from defence-first engagement to one shaped increasingly by science, industry and technology architecture.

The key question now is how this progress can be locked into institutional structures capable of outlasting electoral cycles. The next phase of cooperation could be shaped by three essential design principles. First, trusted technology frameworks must be developed with clarity on data, patents and digital governance. Predictability will encourage investment. Second, green supply chain collaboration must move from aspiration to implementation, including alignment on critical minerals, recycling technology and storage solutions. Third, mechanisms to enhance trade resilience — including dedicated supply corridors and greater use of local currencies — could protect both economies from geopolitical disruption.

India’s role in Washington’s Indo-Pacific strategy underpins much of this momentum. For the United States, India is a critical strategic balancing force. For India, the US is an essential technology and investment partner. Yet New Delhi continues to pursue strategic autonomy while engaging across multiple power centres. This approach invites opportunity but requires careful management. The risk is not disengagement; it is incoherence. Sector-led agreements, rather than a sweeping free trade deal, are likely to offer a workable way forward. They provide flexibility while sustaining ambition.

What is heartening is that dialogue has not stopped despite friction. Political relations remain strong. Commercial engagement continues to expand. The scale of opportunity — in supply chain redesign, green technology, defence co-production and digital services — is substantial. But ambition must now be matched by structure. Without regulatory clarity, predictable policy and institutional durability, trade and investment cannot scale with confidence.

The India–US partnership has the potential to become one of the defining economic relationships of the next decade. Its future will not be shaped by symbolism or sentiment, but by design. If sector-based cooperation is formalised, if tariff issues are systematically addressed and if innovation is matched with regulatory stability, both sides can benefit meaningfully. That requires moving beyond ad hoc negotiation and towards frameworks that reconcile national priorities with shared interests.