The recently finalized India US trade deal has been projected as a diplomatic breakthrough and an economic win for New Delhi.
Reduced American tariffs on Indian exports, fresh commitments on energy sourcing, and promises of large scale investment have been presented as proof of India’s growing global leverage. But once the celebratory language is stripped away, the agreement appears deeply uneven.
Far from strengthening India’s economic position, it risks weakening domestic manufacturing, compromising energy autonomy, and exposing the hollowness of the current government’s approach to diplomacy and economic governance.
At the heart of the problem lies the tariff structure. The United States has reduced tariffs on Indian goods from punitive levels to roughly 18 percent. This has been sold as a major concession.
Yet context matters. An 18 percent tariff remains high in global trade terms, particularly for price sensitive exports such as textiles, light engineering goods, and processed agricultural products.
In contrast, India has reportedly agreed to bring tariffs on a wide range of American goods close to zero, including manufactured products and agricultural items. This creates a structural imbalance. Indian producers will continue to face a significant cost barrier in the US market, while American companies gain near unfettered access to India’s vast consumer base.
This asymmetry directly undermines the Make in India narrative. Indian manufacturing is still in a developmental phase, marked by uneven infrastructure, limited access to low cost capital, and fragmented supply chains.
Opening domestic markets at near zero tariff levels to highly capitalized US firms does not create fair competition.
It accelerates import dependence. In sectors like electronics, medical equipment, agri inputs, and industrial machinery, Indian firms will struggle to compete on price and scale. Over time, this can hollow out domestic production, weaken employment, and increase India’s reliance on foreign suppliers for critical goods.
Trade liberalization can be beneficial, but only when sequenced properly. Successful economies that opened their markets did so after building industrial depth and competitiveness.
India is attempting the reverse. The result is not integration but exposure. The government’s assumption that market forces alone will push Indian firms up the value chain ignores structural realities.
Without strong industrial policy, targeted subsidies, and long term support, tariff elimination becomes a shock rather than an opportunity.
Energy commitments make the deal even more troubling. India’s agreement in principle to reduce or halt Russian and Iranian oil purchases under US pressure signals a dangerous dilution of strategic autonomy.
Russian crude has been a stabilizing factor for India’s energy basket, offering competitive prices and flexible payment mechanisms. Replacing it with supplies from Venezuela or the United States is not a simple substitution.
Venezuelan oil faces its own sanctions related uncertainties, logistical constraints, and quality issues. US crude, meanwhile, is generally more expensive and tied to geopolitical conditions.
Linking trade concessions to energy sourcing sets a precedent where India’s energy security becomes a bargaining chip in foreign negotiations.
This contradicts decades of non aligned and multi vector foreign policy thinking. Strategic autonomy is not preserved through rhetoric but through diversified, interest driven choices.
By allowing energy decisions to be shaped externally, the government weakens India’s long term bargaining power.
The political handling of the agreement further compounds concerns. A deal of this magnitude should have involved parliamentary debate, detailed disclosures, and consultations with industry bodies, farmers, and state governments.
Instead, it was announced through political statements and celebratory messaging before a comprehensive, legally vetted text was made public.
This style of governance prioritizes optics over accountability. It also limits the public’s ability to assess trade offs that will affect livelihoods for decades.
Supporters argue that the agreement boosts investor confidence and strengthens ties with the world’s largest economy.
Markets did respond positively in the short term. But market sentiment is not a substitute for structural resilience. Investor confidence built on concessional access can evaporate if domestic industries weaken or if future US administrations reinterpret the deal.
Trade agreements must be built on enforceable reciprocity, not political goodwill.
For Indian businesses, the outlook is mixed at best. A narrow band of exporters may benefit from lower US tariffs.
But the broader industrial ecosystem faces intensified competition at home with limited safety nets. Small manufacturers and informal workers will bear the brunt, as they lack the capital and time needed to adapt.
Without a parallel push in skill development, logistics reform, and technology upgrading, the agreement risks widening inequality within the economy.
Ultimately, this trade deal reflects a deeper issue in the current Modi government’s economic and diplomatic strategy.
There is an overreliance on headline announcements, personal diplomacy, and symbolic victories, often at the expense of institutional process and long term planning. Trade is not about press releases. It is about power, protection, and productivity.
If India’s ambition is to become a genuine manufacturing and economic powerhouse, it must negotiate from a position of internal strength.
That requires building capacity first and opening markets later, not the other way around. As it stands, this agreement looks less like a strategic partnership and more like a concessionary bargain.
History is unlikely to remember it as a turning point. It may instead be recalled as a moment when speed overtook strategy, and India paid the price.
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