India-US trade deal: India's economic moves come with strategic strings

Pax Silica and import commitments highlight opportunities and risks

India’s interim trade agreement framework with the US, along with Washington’s invitation to New Delhi to join the Pax Silica initiative, could help India regain its centrality in America’s Indo-Pacific strategy and reduce its reliance on China for critical minerals.

 

However, observers of India’s foreign policy, trade experts, and political leaders have questioned New Delhi’s commitment to buying $500 billion worth of goods — $100 billion annually over the next five years — and have flagged a possible erosion of strategic autonomy if India were to halt all oil purchases from its long-standing partner, Russia. 

Government sources say the trade deal would help bring the India–US relationship back to normal after 12 months of uncertainty. Yet concerns remain over closer US–Pakistan ties and restrictions on H-1B visas for Indians. New Delhi also remains circumspect about hosting the Quad Summit this year. India was scheduled to host it last year, but it was postponed. 

In Washington on Friday, Under Secretary of State for Economic Affairs Jacob Helberg said the US was “very excited” to have extended an invitation to India to join the Pax Silica initiative on supply chain security. He said India was probably the only other country on Earth capable of “rivalling China” in terms of the sheer volume of human talent. “I will be travelling to India in just a couple of weeks for a major signing with the Indian government,” Helberg said, hailing the interim framework trade agreement.

 

India was not among the signatories to Pax Silica, which was launched in December. External Affairs Minister S Jaishankar attended the critical minerals ministerial meeting hosted by the US on February 4. “India is also home to a very large mining and processing operation, which obviously holds great promise to make meaningful contributions to the supply chain ecosystem. There is a lot of terrain on which we will be able to partner India,” Helberg said.

 

Speaking to Business Standard, Ashwani Mahajan, national co-convenor of the Swadeshi Jagran Manch, an economic think tank affiliated with the Rashtriya Swayamsevak Sangh, said India’s proposed $500 billion in imports from the US over five years should be seen as an “intent”, not a “pledge”. “In any case, we purchase aircraft from the US, and there are existing orders for 1,000 aircraft. Our steel industry needs large quantities of coking (metallurgical) coal, which we could import from the US,” he said. This, he added, would reduce India’s reliance on China for coking coal and high-end technology, which carries “huge security concerns”.

 

Mahajan said the gains from India’s purchases of cheaper Russian oil are yielding diminishing returns. “The price difference has fallen from $20–30 per barrel to less than $5, and the cost advantage has declined from savings of $8 billion to less than $1 billion this year,” he said. Political parties, including the Congress and the Left, have asked whether India could end up eroding the nearly $45 billion trade surplus it currently enjoys with the US.

 

Commerce Minister Piyush Goyal said on Saturday that questions on Russian oil purchases should be directed to the Ministry of External Affairs (MEA). On the same day, the MEA reiterated that “insofar as India’s energy sourcing is concerned, the government has stated publicly on several occasions that ensuring the energy security of 1.4 billion Indians is the supreme priority”. It added: “Diversifying our energy sourcing, in keeping with objective market conditions and evolving international dynamics, is central to our strategy. All of India’s actions are taken, and will be taken, with this in mind.”

 

On Thursday, the MEA said Venezuela has been a long-standing energy partner, saying that India purchased oil from Venezuela in 2019–20 and again in 2023–24. “Consistent with our approach to energy security, India remains open to exploring the commercial merits of any crude supply options, including from Venezuela,” MEA Spokesperson Randhir Jaiswal said.

 

US President Donald Trump said last week that India has agreed to buy more oil from Venezuela instead of Russia. According to a Reuters report, Reliance Industries has bought 2 million barrels of Venezuelan oil from trader Vitol — the company’s first such purchase from the South American nation in nearly a year.

 

Referring to a US executive order, former foreign secretary Nirupama Menon Rao said the US decision to roll back a 25 per cent tariff on Indian imports — because India had taken “significant steps” to reduce Russian oil purchases — “signals that energy choices are now treated as geopolitical behaviour, not merely commercial decisions”. “The order also shows how strategic autonomy is being stress-tested in practice: sovereign policy choices increasingly carry measurable economic costs or incentives,” she said.

 

In a social media post, Rao said the interim framework of the trade deal also underscored that “India’s leverage is visible”. The tariffs were reversible because India matters economically, strategically, and in the Indo-Pacific balance, she said. “The uncomfortable subtext is conditionality, since the order explicitly allows monitoring and potential snapback if Russian oil imports resume.”