Modi negotiates with Washington

On 12-13 February, Prime Minister Narendra Modi will make a state visit to Washington, the third world leader to visit new U.S. President Donald Trump. There is a big agenda for the U.S. and India bilaterally and geopolitically. Principal among them will be the status and impact of the two wars, in West Asia and Europe, the Indo-Pacific and China’s continued regional aggressions, and the impact of Trump’s changes in U.S. domestic and foreign policy in terms of trade and migration for India.

The signs for a successful meeting are already in place. At the Trump inauguration, External Affairs Minister S. Jaishankar was the first foreign minister to meet his new U.S. counterpart, Marco Rubio, who also made the meeting with the QUAD foreign ministers his first.

Trump’s positions on the three issues are already well known, and India has moved quickly to avoid a confrontation with the U.S., its largest trading partner with which it also has a surplus. On Feb 6, a military aircraft flew 106 Indians who had illegally migrated to the U.S., into Amritsar. India also agreed to lower duties on U.S. goods like high-end motorcycles and textiles and import more big-ticket defence and other security equipment from the U.S., This may stall a tariff onslaught from Washington for now, but New Delhi will need to think fast and plan for trade equity seriously.

Luckily for India, it has recently embarked on its external trade journey and is in learning mode. The recent free trade agreements (FTA) signed with Australia and the UAE and the trade and investment agreement with four non-EU countries[1] are signs of India becoming more open to trade and of other countries understanding the Indian condition. There is talk of restarting negotiations on a mini-FTA with the U.S., which had fallen through in 2020 under the first Trump administration. If a mini-lateral does fructify, it may lead to a further rationalisation of tariffs, which, more broadly, will be good for India, a country that has always played defensive on issues of trade.

India’s $36.8 billion trade surplus with the U.S. in 2023-24[2] is dominated by engineering goods such as auto parts, and non-ferrous metals; the U.S. is also the single largest beneficiary of India’s IT trade: 62%[3] of India’s total IT-ITeS exports go to the U.S. Since Covid and the opportunity presented by a China+1 scenario, Modi has doubled down on making Indian goods competitive through the Make in India programme[4], adding incentives for key industries like defence, to help the country transform into a global design and manufacturing hub. Many of these programmes have co-production clauses with the U.S.[5]especially in defence. This will create a strategic trade balance in the bilateral.

In this setting, Modi will surely be advised that any movement on tariffs should come as a response, and not a preemptive concession – which could trigger further demands from Trump. Already, the U.S. has imposed 25% tariffs on steel and aluminum imports worldwide; this makes up nearly 5% of the basket of goods that India exports to the U.S. India should be willing to do more on tariffs, no matter the domestic difficulty. New Delhi must allow its negotiators freedom and room to make an agreement, and the confidence to leave something on the table, should it be necessary.

The issue of illegal migration, however, is more difficult. India has agreed to take back 18,000 of its citizens who are illegal migrants, after the U.S. issues verification checks. This is largely because Bangladeshis and Pakistanis are often mistaken for Indians, and may be included in the list of illegals. It is well known that in several countries around the world where the smaller nations of the subcontinent do not have national representation, the Indian mission becomes the de facto centre for resolution of issues. As India’s reputation has soared over the past few years, passing off as Indian provides legitimacy, especially to those from countries on global terrorism lists.

Within India, the issue of returning illegal migrants is necessary to tackle. The repatriation was a wake-up call for India to deal with people-smugglers and criminal agents. This is both a central and a state issue. Those who have been repatriated have to be dealt with by the states from where they come, but those like Punjab may not want to manage it at all – even if to its own detriment. Punjab has made an industry of sending its youth to the west as illegal migrants, and has done little to develop its own economy and industry, forcing the young to forsake the state and country for low-end jobs abroad.,

In return for India’s cooperation, the U.S. can help by aligning itself with India’s interests in its neighbourhood, where Muslim majority countries are in turmoil and the threat of fundamentalism and terrorism is once again in the ascendant. It is becoming clear from revelations after the recent closure of USAID, that its activities have fanned unrest in many countries.

This is evident in the case of Bangladesh[6], where the overthrow of former Prime Minister Sheikh Hasina in July 2022, encouraged by elements in USAID and the appointment of Mohammad Yunus, a Hillary Clinton donor-friend, at the country’s top position without elections, has made India’s neighbourhood hostile. The group has re-ignited networks with erstwhile parent West Pakistan, which has over decades been engaged in terrorism in Kashmir. The worry in New Delhi is that it can rile-up insurgencies in the Northeast, where states on the border with Myanmar[7] are already seeing instability. Working together with the U.S. to de-toxify Bangladesh, and to release Myanmar from the chokehold of U.S. sanctions, will help tamp down the regional tensions, already used by China as fertile ground to sow trouble.

In both the Maldives and Sri Lanka, to which India has given considerable political backing and monetary support in the form of grants, the leaders have made China their second stop after India, with the Maldives even signing an FTA with China. Modi must make this a central point of the talks during his visit.

Modi’s hand has been strengthened by the big win of his ruling Bharatiya Janata Party in the New Delhi elections Feb 8; surely it can only help in the negotiations when he goes to Washington.

Manjeet Kripalani is Executive Director, Gateway House.

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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References

[1] Press Information Bureau Delhi “India-EFTA Trade and Economic Partnership Agreement”, Ministry of Commerce and Industry, March 10, 2024, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2013169

[2] India Brand Equity Foundation “India US Trade”, January 2025, https://www.ibef.org/indian-exports/india-us-trade

[3] Ibid

[4] Press Information Bureau “10 Years of Make in India”, Ministry of Commerce and Industry, September 25, 2024, https://pib.gov.in/PressNoteDetails.aspx?NoteId=153203&ModuleId=3&reg=3&lang=1

[5] U.S. Department of Defence “Roadmap For U.S.-India Defense Industrial Cooperation” June 5, 2023, https://media.defense.gov/2023/Jun/21/2003244834/-1/-1/0/ROADMAP-FOR-US-INDIA-DEFENSE-INDUSTRIAL-COOPERATION-FINAL.PDF

[6] Kripalani, Manjeet “Stirring regime change in Bangladesh”, Gateway House, August 15, 2024, https://www.gatewayhouse.in/stirring-regime-change-in-bangladesh/

[7] Patel, Purvi and Ghadyapatil, Charuta “India-Myanmar: Borderland Dynamics”,Gateway House, October 31, 2024, https://www.gatewayhouse.in/india-myanmar-border/