Key Pillars Of India-US Relations Across Sectors

India and the United States share a strong global strategic partnership that spans nearly all fields. This relationship is built on common democratic principles, aligned interests on various issues, and close connections between their people.

India and the United States have created a wide-ranging dialogue structure to guide their long-term partnership. This framework covers many areas, including trade, investment, defense, security, education, science, technology, cybersecurity, nuclear energy, space exploration, environmental protection, agriculture, and healthcare.

Over the last seventy years, India-US relations have evolved significantly, moving from being seen as “estranged democracies” to being recognized as “natural allies.”

This transformation has led to the creation of a “comprehensive global strategic partnership” based on shared democratic principles and increasing alignment on bilateral, regional, and global matters.

India-US Defence Relations

The defense sector has become a key highlight of India-US relations, showing rapid growth in a short period. Defense trade between the two countries has expanded significantly, with the United States now being India’s fourth-largest arms supplier.

Additionally, joint military exercises have increased notably, reflecting the strengthening defense partnership.

India and the United States have signed four key defense agreements over the years to strengthen their partnership. These are the General Security of Military Information Agreement (GSOMIA) in 2002, the Logistics Exchange Memorandum of Agreement (LEMOA) in 2016, the Communications Compatibility and Security Agreement (COMCASA) in 2018, and the Basic Exchange and Cooperation Agreement (BECA) in 2020.

These agreements enable the exchange of military information, access to each other’s bases, improved interoperability, and the sharing of advanced technologies, further strengthening their defense cooperation.

Since 2008, U.S. defense exports to India have risen dramatically to over $25 billion, a significant leap from almost nothing a decade earlier. India has become one of the largest buyers of U.S. military equipment, including Apache helicopters and C-130 transport aircraft.

Beyond arms trade, the two nations are now collaborating on the co-development and co-production of advanced defense technologies, solidifying their position as leaders in defense innovation.

India- US Trade Relations

Trade Surplus: In 2022–23, India recorded a trade surplus with the US of $28 billion, showcasing a favorable trade balance.
Bilateral Trade Growth: Bilateral trade grew significantly, reaching $128.55 billion in 2022–23, up from $119.5 billion in 2020–21, according to the commerce ministry.
Defense Trade: Defense trade between India and the US has steadily increased, highlighting stronger collaboration in the defense sector.
Service Sector Dependency: India’s IT industry and service sector rely heavily on the US market, highlighting the significance of their economic relationship.
Indian Investments in the US: As per a CII report, more than 160 Indian companies operate across all 50 US states, contributing over $40 billion in tangible investments.
Trade Volume Target: India and the US aim to achieve a $500 billion trade volume, showcasing their dedication to deepening economic cooperation.
Mini Trade Deal: Efforts are underway to finalize a “mini trade deal” as progress on a Free Trade Agreement (FTA) has encountered hurdles.
Digital Tax Agreement: India and the US have agreed on a transitional approach to the Equalisation Levy (digital tax), addressing modern trade challenges.

India And the U.S.: Trade Relations Amidst Challenges

Trump’s Trade War Threats
Donald J. Trump, the 45th President of the United States, has warned of initiating a trade war to address the trade deficit the U.S. has with nearly every country it trades with. His approach of using trade conflicts as a tool to “Make America Great Again” has gained traction and carries significant implications for India.

Additionally, Trump has threatened BRICS nations with 100% import duties if they attempt to replace the U.S. dollar in international trade. India, however, has clarified that it does not support China’s dedollarization initiative, signaling a divergence within the BRICS bloc.

Trade Volume and Risks
The bilateral trade between India and the U.S. stands at over $190 billion, which is modest compared to trade volumes between the U.S. and nations like China ($575 billion), Canada ($908 billion), or Mexico ($807 billion). Despite this, India cannot assume immunity if the U.S. imposes trade restrictions on its partners.

Opportunities for India Amid Trade Shifts
The Federation of Indian Export Organisations (FIEO) has identified key sectors where India could benefit if the U.S. reduces its reliance on Chinese imports. These sectors include:

Apparel and textiles
Pharmaceuticals
Automobiles
Electronics
High-end engineering
Chemicals

As businesses shift from China, India stands to gain significantly in these industries.

Strengthening Bilateral Trade
India is actively increasing its imports from the U.S., reflecting a more balanced trade relationship. According to the Ministry of External Affairs, India and the U.S. enjoy a comprehensive global strategic partnership, driven by shared democratic values, common interests, and robust people-to-people ties.

Indian Diaspora as a Bridge
The Indian-American community, comprising about 4.4 million individuals, plays a vital role in strengthening the relationship between the two nations. This sizeable population contributes to closer economic and cultural ties, making the bilateral partnership resilient, regardless of political leadership in the U.S.

India-US Strategic Engagement

Strategic Energy Partnership (SEP)

The India-US energy dialogue has been elevated to the Strategic Energy Partnership (SEP) level.

In 2021, during the Leaders’ Summit on Climate, the two countries launched the US-India Climate and Clean Energy Agenda 2030 Partnership.

Key initiatives under this partnership include:

The 2030 Agenda for climate and energy collaboration.
Redesigning the Strategic Clean Energy Partnership (SCEP).
Reviewing the progress of India-US Civil Nuclear Energy Cooperation.
The Gas Task Force has been renamed the India-US Low Emissions Gas Task Force, reflecting a focus on reducing emissions.

Civil Nuclear Cooperation (2008)

India and the US have made significant progress in civil nuclear cooperation, including plans for building six AP 1000 reactors in India by Westinghouse, a project of major global significance.

In 2020, the two nations extended their Memorandum of Understanding on the Global Centre for Nuclear Energy Partnership (GCNEP) for another ten years, enhancing collaboration in nuclear energy.

Strategic Partnership

The India-US strategic partnership has grown stronger, especially as a counterbalance to China’s rise and assertive actions in the Indo-Pacific region.

The relationship has been institutionalized through mechanisms such as the 2+2 Ministerial Dialogue, which fosters high-level engagement.

Both nations are also actively working to strengthen the QUAD alliance with Japan and Australia, aiming to promote a peaceful, stable, and rules-based order in the Indo-Pacific.

India-US Cooperation At Global Level

The United States and India have collaborated on various important initiatives and consistently supported each other’s goals on the global stage.

US Support for India’s Global Role: The United States has endorsed India’s bid to secure a permanent seat in a restructured United Nations Security Council (UNSC). It has also advocated for India’s swift inclusion in the Nuclear Suppliers Group (NSG), an essential organization focused on nuclear non-proliferation.
Extending Global Development Cooperation: The India-US Global Development Partnership Agreement has been renewed for another five years. This extension enables joint efforts to assist partner nations, highlighting the shared dedication of both countries to advancing global development.
Triangular Cooperation Agreement Extended: India and the United States have reaffirmed their commitment to the Statement of Guiding Principles (SGP) on Triangular Cooperation for Global Development. The agreement has been extended until 2026. Triangular cooperation involves two donor nations working together to assist a third country in achieving its development objectives.

Impact Of The iCET Initiative On Technological Advancements in India and the U.S.

The Initiative on Critical and Emerging Technologies (iCET), launched by India and the United States in May 2022, is driving significant progress in technology for both nations. Here are the key areas of its influence:

Strategic Technology Partnership
iCET enhances collaboration between the two countries by focusing on the joint development and production of critical technologies. Key areas include artificial intelligence (AI), quantum computing, biotechnology, advanced wireless systems, and next-generation telecommunications.

Advancements in Defense Technology
The initiative promotes innovation in defense through mechanisms like the India-U.S. Defence Acceleration Ecosystem (INDUS-X). This platform fosters cooperation in designing and producing advanced defense technologies.

Strengthening Innovation Ecosystems
iCET facilitates collaboration among academia, industry, and government from both nations to create vibrant innovation ecosystems. This approach encourages shared research and technological breakthroughs.

Building Resilient Supply Chains
A major focus of iCET is improving semiconductor supply chain resilience. By enhancing domestic manufacturing capabilities, the initiative reduces dependence on external sources and addresses the global semiconductor shortage, strengthening national security.

Human Capital Development
iCET prioritizes education and training in STEM fields to develop a skilled workforce. These efforts aim to empower individuals to drive innovation and support advancements in critical technology sectors.

Issues In Indo-US Relationship

India-Russia Defense Relations and Their Challenges: India’s long-standing defense partnership with Russia presents challenges for cooperation between the armed forces of India and the United States. A key issue is the difficulty in achieving interoperability and seamless communication due to differences in the compatibility of American military equipment with Russian systems.
U.S. Stance on CAATSA and India: The United States has cautioned India about potential sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA). This warning comes in response to India’s purchase of the S-400 missile defense system from Russia.
WTO and Trade Disputes: Disagreements persist in the World Trade Organization (WTO), especially over the Doha Development Agenda (DDA). While the U.S. and other developed nations push for the inclusion of “New Issues,” India and other developing countries emphasize the need to first fulfill existing DDA commitments.
Ongoing Trade Disputes: Key trade issues between India and the U.S. include unresolved negotiations on the Bilateral Investment Treaty, disagreements over India’s digital services tax (DST), and India’s exclusion from the U.S. Generalized System of Preferences (GSP) program since 2019.
Challenges in the Services Sector: While India and the U.S. compete in certain service industries, foreign ownership restrictions and requirements for a local presence in India limit market access for U.S. companies.
Agriculture Trade Challenges: Sanitary and phytosanitary (SPS) barriers restrict India’s agricultural exports to the U.S. Additionally, both countries view each other’s agricultural support programs as causing market distortions.
Intellectual Property Concerns: India remains on the United States’ Priority Watch List in the 2021 “Special 301” report due to ongoing concerns about intellectual property protection and enforcement.
Climate Change Disagreements: Key differences include disputes over meeting financial commitments to developing nations and contrasting strategies for achieving net-zero emissions targets.

India’s Strategic Role In U.S. Policy: A Counterbalance To China

China as a Strategic Threat: Key U.S. policy documents, like the National Defence Strategy (2018) and National Security Strategy (2017), highlight China as a major strategic challenge. These documents label China as a “revisionist” power that threatens U.S. interests globally.
India as a Geopolitical Counterweight: India is viewed by the U.S. as a crucial counterbalance to China’s regional influence. As a democratic nation and an emerging economy, India aligns with American values and strategic goals, offering an alternative to China.
Strengthening India’s Role: India’s role goes beyond self-reliance and capacity building. The U.S. sees India as pivotal in countering China’s expanding influence and seeks to empower it as a security provider in the Indian Ocean region.
India as a Defence Partner: The U.S. aims to deepen its defence partnership with India. This collaboration focuses on shared goals, such as maintaining regional stability and enhancing India’s strategic capabilities.
The Indo-Pacific Vision: The Indo-Pacific Strategy Report highlights India’s critical role in U.S. policy for South Asia and the Indian Ocean. China’s growing assertiveness in the region has made India an essential partner in addressing common challenges and promoting stability.
A Nuanced Partnership: Despite these strategic ties, U.S. Ambassador Eric Garcetti recently clarified that the U.S. views India as more than just a counterbalance to China. He described India as a “friend and partner,” emphasizing shared principles like sovereignty and the rule of law. This approach reflects a more collaborative and peaceful stance towards China rather than an adversarial one.

India And U.S. Cooperation Against China’s Belt and Road Initiative

Strategic Alignment Against the BRI
India views the Belt and Road Initiative (BRI) as a tool for China’s strategic encirclement, especially through projects like the China-Pakistan Economic Corridor (CPEC), which passes through disputed areas in Kashmir. To counter this, India is enhancing partnerships in the Indian Ocean Region (IOR) and working through multilateral platforms to resist Chinese influence.

Key Initiatives to Counter the BRI

1. International North-South Transport Corridor (INSTC)
The INSTC connects India, Iran, and Russia via a multi-modal transport network. This initiative promotes trade and reduces dependency on Chinese trade routes, providing an alternative to the BRI for regional connectivity.
2. India-Middle East-Europe Economic Corridor (IMEC)
Proposed as a counterweight to the BRI, the IMEC aims to strengthen trade links between India, the Middle East, and Europe. This corridor focuses on creating a strong infrastructure network to compete with China’s expanding regional presence.
3. Quad Cooperation
Through the Quadrilateral Security Dialogue (Quad), which includes the U.S., Japan, and Australia, India collaborates on security and economic projects. The Quad promotes a rules-based order in the Indo-Pacific, indirectly challenging BRI’s dominance.

Strengthening Indo-US Relations: The Way Forward

Connectivity and Infrastructure: The U.S., along with Japan, can invest in joint infrastructure projects in Indian Ocean littoral states. This can serve as a counterbalance to China’s expanding influence in the region.
Maritime Cooperation: Both nations should enhance collaboration in the maritime domain, focusing on the blue economy and maritime domain awareness to ensure security and sustainability.
Boosting Trade: To achieve the ambitious goal of $500 billion in trade by 2025, it is crucial to finalize the Bilateral Investment Treaty and address trade barriers effectively.
Supply Chain Resilience: Working with partners like Australia and Japan, India and the U.S. can diversify and strengthen supply chains through initiatives like the Supply Chain Resilience Initiative.
Space Governance: With China’s advancements in space capabilities, space governance is becoming a critical area of focus for Indo-U.S. relations, promoting collaboration on rules and technologies.
Indo-Pacific Partnership: Both countries must work together to maintain a free, open, and rules-based Indo-Pacific region, ensuring peace and stability.
Technology Transfer and Innovation: Leveraging India’s young and skilled workforce, the U.S. and India have vast opportunities for technology transfer, increased manufacturing, trade expansion, and mutual investment.