By Shivaji Sarkar
India is poised to enhance its economic partnership with the U.S. through a significant $500 billion agreement that will include the procurement of crude oil, advanced weaponry—specifically the contentious F-35 stealth fighters—and adjustments to tariffs in accordance with U.S. trade expectations. This development comes as President Donald Trump, renowned for his stringent trade policies, approves the deal, making India the fourth nation to be reportedly offered the F-35, following Israel, South Korea, and Singapore. With a staggering development cost of $1.17 trillion, the possible integration of the F-35 into India’s defense capabilities raises questions regarding its effects on India’s Atmanirbhar Bharat initiative.
India’s homegrown LCA project has already encountered hurdles due to delays in U.S. engine supplies. The F-35, being a single-engine fighter, may not be the best fit for high-intensity confrontations with adversaries such as China or Pakistan. In contrast, Russia has proposed the Su-57 Felon under an expedited Make-in-India plan, with production potentially starting by the end of the year.
Prior to Prime Minister Narendra Modi’s 36-hour trip to Washington, Trump enacted updated global tariff policies. During a joint press conference with Modi, he criticized India’s high tariffs, pledging to implement corresponding import duties. “Whatever India charges, we charge them. So frankly, it no longer matters to us that much what they charge,” Trump remarked, highlighting his firm stance in trade discussions. Modi expressed appreciation for Trump’s dedication to national interests, stating, “One thing that I deeply appreciate, and I learn from President Trump, is that he keeps the national interest supreme. Like him, I also keep the national interest of India at the top of everything else.”
Establishing uniform tariffs is a multifaceted procedure. It involves more than just import taxes; it also requires a reassessment of concessions and other benefits for domestic industries. This may influence Indian industrial output or necessitate a restructuring of production costs to enable the U.S. to collect lower tariffs, which Trump claims American importers face. Such measures could dismantle barriers and facilitate the influx of U.S. goods into Indian markets. Trump has expressed dissatisfaction with India’s reductions in budgetary duties for Harley Davidson motorcycles from 70% to 30% and cuts on lithium-ion batteries, indicating that electric vehicles are no longer a priority for him.
“Tariff,” explains Richard Rossow, head of the India program at the Centre for Strategic and International Studies, “is going to be a boxing match. India is willing to take a few hits, but there’s a limit.” The U.S. faces a trade deficit of $45.6 billion with India. Currently, the U.S. trade-weighted average tariff rate stands at approximately 2.2 percent, according to World Trade Organization data, compared to India’s 12 percent, although the U.S. suggests the figure is much higher.
Prime Minister Modi has expanded the budget for oil purchases to $25 billion from $15 billion, facilitating Trump’s aim to significantly boost U.S. oil production and exports, encapsulated by the slogan “Drill, baby, drill.” In November, S&P Global Commodity Insights (SPGCI) reported that Asian oil importers, including India, are expected to gain more opportunities to source “attractively priced crude from the U.S.” as its rivalry with OPEC suppliers escalates.
Trump explicitly stated, “Washington hopes to become the top oil and gas supplier to New Delhi.” This means India may need to forsake access to closer and more convenient markets like West Asia. Presently, Saudi Arabia is India’s third-largest petroleum supplier, providing 39.5 million metric tons. Iran’s supply was cut off years ago due to U.S. sanctions. The implications for Russian oil imports, which have benefited the profits of two major private refiners in India, remain uncertain.
India has maintained its relationship with Russia amidst the ongoing conflict in Ukraine, continuing to be a significant consumer of Russian energy resources, even as Western nations have reduced their intake since the war began. “The world had this thinking that India somehow is a neutral country in this whole process,” Modi remarked, “But this is not true. India has a side, and that side is of peace.”
According to India’s official trade records, from January to November 2024, India imported 7.2 million tonnes of oil from the U.S., constituting 3.2 percent of New Delhi’s overall oil imports. Russia currently leads as India’s top oil supplier, followed by Iraq, Saudi Arabia, the United Arab Emirates, and the U.S. In terms of LNG, India imported 5.12 million tonnes from the U.S. during the same period, accounting for 20.2 percent of total LNG imports.
Rising freight costs, a factor in acquiring light natural gas (LNG) from the U.S., might be offset by competitive pricing of American gas, with the landed costs being lower than those from West Asia. There are additional concerns; during recent conflicts involving Israel, Gaza, Houthi forces (Yemen), and Hezbollah (Lebanon), India’s DAP fertilizer shipments had to reroute via Africa, driving up prices, extending delivery times and complicating logistics. This situation has also disrupted the development of the India-Middle East-Europe Corridor (IMEEC), which aims to connect India with Europe and the Middle East through the UAE, Saudi Arabia, Jordan, Israel, and the European Union, all orchestrated by an Indian business consortium now managing Israel’s Haifa port. These challenges could escalate further.
Indian strategists remain skeptical about acquiring the high-cost single-engine F-35. In October 2024, India and the United States finalized a deal to procure 31 Predator drones from General Atomics, a transaction estimated at around $4 billion, which is intended to bolster India’s surveillance capabilities.
As reported by the U.S. Congressional Research Service, New Delhi is projected to invest over $200 billion in military modernization over the next decade. Planners aim to transition away from reliance on Russia, which has historically been India’s primary arms supplier.
As a major energy consumer, India is now considering nuclear energy as a low-carbon source for base load power generation. Despite ongoing discussions with Westinghouse regarding a reactor, substantial progress has yet to materialize, and it remains unclear whether certain diplomatic issues involving summonses against specific Indian officials have been resolved.
It is expected that the F-35 proposal will undergo rigorous scrutiny. India did not initiate a request for this aircraft; rather, it emerged as an offer during Modi’s visit. Tariffs will continue to pose challenges alongside U.S. intentions to increase crude oil sales. The prime minister’s visit involved numerous U.S. negotiations. While components such as crude and gas imports may yield immediate benefits, one must consider how many other strategic U.S. offers will ultimately materialize. Tariff regulations and illegal immigration issues are poised to remain contentious points with potential ramifications.
