Art of the India-US trade deal’s revival: The end of a rift between the two partners could spell gains all around

That rupture had cast a long shadow of risk on all manner of American economic dealings with India, from setting up factories here to investing in our capital markets. No wonder Indian stock market indices shot up in relief.

Earlier, US President Donald Trump’s apparent indifference to a weakening dollar had sent US markets into a slump, dragging markets elsewhere down, ours included. Now that it is clear that India-US relations are back on an even keel, Indian equities have rallied.

It is a sign of the mutual gains expected should our bilateral trade take the trajectory that was once envisioned—with Indian manufacturers drawn into the loop of American supply chains. For now, labour-intensive industries that were reeling under Trump’s tariffs have reason to rejoice.

As reported, the contours of an India-US pact had been thrashed out earlier; even its finer details had been falling into place, with some divergences over US access to Indian markets for agri-products the last bits left to address. What got in the way, it seems, was Trump’s ire over India’s oil imports from Russia.

He has portrayed his sudden rethink as a result of a concession that he claims to have extracted from New Delhi—that our Russian shipments would stop. In any case, US sanctions had imposed a squeeze, although that did not mean Russian oil had no way of finding its way here. Shadow fleets are known to ship crude from Russia’s ports along circuitous routes that obscure the cargo’s origin.

So while the White House may seem bent on foisting American and Venezuelan crude on India, our refiners need not end up short of options. Venezuela’s oil may take a long time to flow, given the state of its hydrocarbon industry, but once it does, we could handle it. We have several refineries that can refine the kind of heavy and sour stuff it ships. Reliance, for example, once used to buy its crude and could plausibly resume.

In terms of geopolitics, what’s notable about this patch-up is that Trump’s negative disposition towards India over last summer’s ceasefire with Pakistan now seems like a thing of the past.

But then, India’s efforts to get by without a US deal may have played a role in it.

New Delhi has doubled down on a mission to globalize its economy with a flurry of trade pacts with various partners. One in the works with the EU could not have gone unnoticed; nor some of our budget measures aimed at greater integration with the global economy. Going by Trump’s social-media post, he expects India to import $500 billion worth of US goods over an unspecified timeframe.

For our bilateral trade balance not to go out of whack, that would require a jump in our exports to the US. As for his claim of India offering duty-free market access to US exporters, we await the deal’s details. Our approach has been to lower tariffs gradually and that’s unlikely to change. Also, the government cannot afford to alienate farmers, so agri-imports will be under close watch.

On the whole, though, an economy that is more open to trade is also more likely to perform better globally. If we get our act together, lowering barriers should serve us well.