PM Narendra Modi with US President Donald Trump.
Credit: Reuters Photo
The Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government tried very hard to wrangle a trade deal with Prime Minister Narendra Modi’s friend United States President Donald Trump.
Numerous concessions were offered in Budget 2025-2026: abolition of equalisation tax on advertisement and other incomes of US digital business companies like Google and Netflix, reduction of customs duty on US whiskey, and so on.
Modi made a dash to Washington DC in February to secure a trade deal with Trump. Indian negotiators camped there for weeks, holding protracted negotiations. For a long time, Modi maintained a stony silence despite Trump’s absurd claims on a ceasefire with Pakistan and other provocations.
Indian negotiators were possibly prepared to accept 15% tariffs on Indian exports to the US.
Nothing, however, worked in the end. India has been slapped with the highest tariffs- 50%. All trade gets simply destroyed at such tariffs. The ‘friend’ has done what is expected from an enemy.
What should India do now? Is a trade deal with the US still possible? Should India junk the US and turn to China and Russia?
India could not size up Trump
A careful study of the deals Trump could secure from countries with large trade surpluses with the US, including Vietnam, Japan, and the European Union, brings out that Trump wants four types of concessions:
- Access for all American goods at zero duty.
- ‘Pay’ 15-30% import duty on exports to the US.
- Commit billions of dollars to purchase aircraft, defence equipment, energy supplies, etc.
- Commit big investments to manufacturing in the US.
Many countries ended up making huge commitments on all four fronts. Whether they intend to live by these commitments is a different matter.
India was in no position to make big commitments on investments, though was quite ready to scale up energy and other purchases.
The most intractable issue was granting zero-tariff access on agricultural products with the removal of non-tariff barriers on genetically-modified (GM) soybean oil and milk from American cows on a non-vegetarian diet.
Indian negotiators failed to size up Trump despite him notching up wins with so many others, perhaps blindsided by Modi’s friendship vibes.
For Trump, what matters is the way he sees US interests and how it serves his ego. Harping on fairness and justice, which the MEA is doing, only exposes its clerical approach.
Indian negotiators kept protracting negotiations on a very narrow brief — don’t concede on agriculture and minimise other concessions. Surprisingly, India had no alternative offensive interests to ask, in case they had to concede what Trump was insisting on.
No wonder there was no give-and-take deal.
Let us not blame Trump entirely for the failure of trade talks. The bankruptcy of our negotiators and our unimaginative and inflexible insistence on agriculture red lines are equally responsible for the result.
A possible deal with Trump
If strategically analysed, India can meet three key Trumpian demands:
- Granting US products access at zero duty and eliminating non-tariff barriers on agricultural commodities by introducing appropriate consumer warnings.
- Scaling up aircraft, defence, and energy purchases, subject to satisfactory prices and technical acceptance.
- Promising large Indian investments in the US, subject to sourcing of investable funds in the US.
In return, India must demand three big concessions:
- Access to all Indian exports to the US at zero tariff.
- The US granting 1 million green cards to Indian professionals.
- The US providing 5,000 Trump golden visas for Indian entrepreneurs at $500,000 apiece.
Such a deal will serve India’s interests massively.
Open business with China
Irrespective of a trade deal with the US, India should be open for business with China, not to take potshots at the US, but in India’s national interests.
Our Chinese policy has been absurdly myopic. Instead of building a big import dependence on Chinese for all new era industrial goods — electronics, solar cells, and EV machines, we must open all these areas for massive Chinese investment, in return for obtaining full access to Chinese financial markets to raise resources to pay for imports from China.
This will, besides costing less and generating employment in India, provide us with much better leverage in case China decides to act against Indian interests.
No special efforts are needed in case of Russia, which is neither a great manufacturing power nor the best military equipment supplier. It has only humongous natural resources — oil, gas, and gold. We can do a big deal with Russians to increase imports of these three commodities in return for Russia permitting Indian companies to own these assets.
Also, we must sew up deals with the EU and Canada quickly.
Think of national interest
Modi, on August 7, a day after the US imposed an additional 25% tariff on India, said that "I know, personally, I will have to pay a heavy price for this". What did he mean by ‘personally, I will have to pay’? He also underlined his resolve to not compromise on farmers’ interests, whatever be the cost — cost to whom: India?
Serving farmers' interests is, in fact, a lame excuse. India is hugely short on edible oil and imports significant quantities. Some tonnage of GM soybean oil from the US will not make any difference to the edible oilseed grouting farmers of India. Likewise, for corn, which has an enormous demand. Moreover, if necessary, farmers' crops would be bought by the government agencies at minimum support prices. No real farmers' interest will be hurt if India opens for GM oil, dairy, and corn.
The failure to strike a good deal with the US will cost all sections of society and many sectors of the economy dearly. Their interests should worry the prime minister; not about him ‘personally’ having to ‘pay a heavy price’.
(Subhash Chandra Garg is former Finance & Economic Affairs Secretary, and author of ‘The Ten Trillion Dream Dented’, ‘Commentary on Budget 2025-2026’, and ‘We Also Make Policy’.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.