The long road to $500 billion: India's US trade pledge won't be easy

India has agreed to buy $500 bn worth of US energy products and other goods as part of a trade deal. This won't be easy, for India has been diversifying its sources

It might be simplistic to tie the outcome of the US-India free trade agreement, which is yet to be formally signed, to India agreeing to invest $500 billion in the US. But that’s what US President Donald Trump said in a social media post last week.  

The joint statement issued by Washington and New Delhi on February 7 clarified that “India intends to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.”

That too is a tall order, especially when the statement mentions energy products first. Energy products are primarily fuels such as crude oil,  liquified petroleum gas and liquified natural gas – the gases used to fire vehicles, industries and kitchens. 

India imports 90 per cent of its crude oil, 60 per cent of LPG and over half of LNG. But all three energy products, which together accounted for 22 per cent of India’s total imports by value in FY2025, or a combined $175 billion, are sourced from several suppliers — primarily from West Asia and Russia. 

The US shipped just over $12 billion of energy products in FY25, including coking and steam coal. Also included in this were petroleum fuels worth around $9 billion, which made up just 5 per cent of India’s total petroleum import basket by value, commerce ministry data showed — illustrating the long road ahead. 

While the joint statement did not give a breakup of the $500 billion goal, even a 20 per cent contribution from energy products would mean India having to boost US purchases eight-fold from current levels in five years-- even as oil and gas prices trend lower on the back of copious supplies —  according to senior officials from the public sector companies Gail Ltd and Petronet LNG Ltd. 

“Analysts would be wise to ignore some of the numbers in the deal, or at least treat them as aspirational,” said Evan 

Feigenbaum, a scholar at Carnegie Endowment for International Peace, a US think tank. “But US-India trade has undershot its potential forever, so ambition is good.”  Overall, India will need to boost imports of products and services from the US by over five fold in five years to meet the target, according to Feigenbaum. US goods exports to India in 2024 were around $41.5 billion and services exports were $41.8 billion.

As for energy, the US share in India’s trade basket is low in both volume and value. The US contributed 5 per cent to India’s crude oil imports in volume terms in 2025, hardly 8 per cent to LNG imports and 7 per cent to LPG supplies, Kpler data showed. 

In value terms, purchases of US coking coal, used in steel plants, and steam coal, used as fuel, declined by 22 per cent in FY25 to $3.2 billion compared with FY24, commerce ministry data showed. Crude purchases from the US rose by 30 per cent to $6.5 billion during the same period, while LNG imports increased by 74 per cent to $2.46 billion. 

Discounts reign 

While it is true that India accelerated Russian crude oil imports 25-fold to over $50 billion in FY25 from just over $2 billion in FY22, prior to the Ukraine invasion, this surge relied on oil discounted by over $10 per barrel, which US suppliers cannot match, senior refining officials told Business Standard. 

Unlike buying aircraft, a market controlled by US’ Boeing and Europe’s Airbus, petroleum is a competitive business. Indian refiners source crude oil at competitive rates from over 40 countries, said oil minister Hardeep Puri at India Energy Week (IEW) in Goa last month. LNG comes from over 10 countries, government data showed. 

“Because our imposed dependency is so high, to nullify the impact we constantly keep exploring different geographies,” Bharat Petroleum’s refining director Sanjay Khanna, who has additional charge of chairman and managing director, told Business Standard in an interview. “And it is part of the business plan itself that each refinery will be going for five additional (types of) crudes this year.”  

Newer suppliers for oil are emerging, such as Brazil and Colombia from Latin America—Brazilian supplies have jumped threefold this year from a year earlier, data from Vortexa showed. Similarly, the UAE has emerged as a big sourcing base for LNG, supplying as much as a fifth of its LNG output to India, said Adnoc Gas CEO Fatema al-Nuaimi. Puri added that India will import more than 4.2 million tonnes of LNG from the UAE every year under term contracts — half as much as it imports from Qatar now. 

French major Total has resumed work at Mozambique LNG, where Indian state oil companies hold a 30 per cent stake and which is a much shorter journey than the US. Oil India CEO Ranjit Rath said the company is participating in the buildout of the $20 billion Mozambique LNG project to provide Indian consumers a cheaper, reliable source of LNG. 

Canadian energy minister Tim Hodgson, a key guest at IEW, expressed strong interest in deepening cooperation with India, particularly in the areas of LNG, oil supplies and long-term energy trade. 

No hurry 

The availability of alternative sources of both oil and LNG has tempered the enthusiasm for US fuels, a senior oil trader said. The trader also said that state-run oil companies, the biggest importers of energy, are bound by strict oversight and sourcing rules that bar preferential treatment for any importing nation, unless there is an explicitly declared formal mandate. 

The US shipped 319,000 bpd of crude oil in calendar 2025 to take a 6.5 per cent share of India’s crude import market. While that measured a substantial 60 per cent jump over 2024, it was still 23 per cent below the 2021 record 415,000 bpd for a 10 percent share, Kpler data showed. 

In the first 40 days of this year, Indian imports of US oil slipped 18 per cent below 2025 levels at 262,000 bpd. Meanwhile, US oil shipments to India averaged 180,000 bpd in December 2025 and January 2026 compared with 520,000 bpd in September 2025. 

US LNG, which is Trump’s biggest pitch to foreign nations, represented just 12 per cent, or 2.9 million tonnes, of India’s total imports in 2025, down from a 19 per cent share in 2024 despite Gail India boosting its fleet capacity, according to Kpler. 

A jump in the price of US benchmark natural gas index Henry Hub (HH) this winter to over $50 per million British thermal units (MMbtu) from $4 million Btu earlier has caused concern among India’s LNG importers, especially Gail, which has long-term contracts for 5.8 million tonnes of US LNG, senior company officials said. 

A top Gail official said that while spikes are normal in winter, these rates are unacceptable to Indian consumers. 

Until last year, there was a rush for HH-linked contracts, said a senior LNG trader at a state oil company. The situation has reversed after HH gained strength in the last few months, the trader said. Indian state-run oil companies had signed up for around 10 million tons per year of LNG in the December 2024-April 2025 period in HH-linked deals.   

The spike in HH rates —which the US Energy Information Administration expects to harden this year and the next—has led Indian LNG importers to review US proposals for LNG supplies, industry officials said and data showed.   

Since late 2025, private sector players like Torrent Power and Indian state entities have switched to oil-linked pricing, company data showed. 

Petronet LNG managing director Akshay Kumar Singh and Sandeep Kumar Gupta, chairman, Gail, emphasised at IEW that LNG prices must be affordable – below $9 per million Btu – for Indian purchases to surge.  At $60 per barrel oil levels, India can bring in LNG at around $8 per million Btu but delivering LNG from the US at even $4 per million Btu HH costs over $10 per million Btu, industry officials said. 

LPG supplies to India are primarily driven by imports from West Asia, T V Pandiyan, Business Head (LPG), Bharat Petroleum said. The first term-contract for US LPG, expected to account for 10 per cent of India’s LPG imports, will start soon, he said.

But given the proximity of Gulf nations to India, long-haul voyages from the US may be one cross too many to bear for India, a country with a voracious appetite for energy products.