India’s American dream in tatters

By Srujana Bodapati

The last couple of months have exposed the humiliating realities of the subordinate alliance that India has been gradually sliding into with the United States over the last three decades. 

The imposition of 50% tariffs on Indian exports to the US, calls on the European Union to impose 100% tariffs on India, the revocation of the US sanctions waiver for the operation of Iran’s Chabahar Port – of great interest to the Indian government – the sanctions on Indian firms and individuals trading in Russian oil and, as a final nail in the coffin, the decision to set a $100,000 fee for applying for an H-1B visa – India has been dealt blow after blow by the US and the Donald Trump administration within the past couple of months.

Calling India, the “tariff king”, Trump imposed a 25% tariff on India goods, essentially because India refused to subject its peasantry – whose average farm size is 2.5 acres – to competition from highly subsidised large US farmers, whose average farm size is 466 acres.

He further imposed an additional 25% tariff while bizarrely accusing India of financing Russian persecution of Ukraine. One might be forgiven for mistakenly attributing the devastation in Ukraine to India and China rather than the US-led Nato proxy war with Russia.

India’s textiles, leather goods, gems and jewellery industries, which are largely small- and medium-scale and labour-intensive, have been hit hard by the tariffs.

While electronics have so far been exempted, last week’s announcement of 100% tariffs on certain pharmaceutical products sent jitters through India’s pharmaceutical industry, which supplies 40% of the generic drugs imported by the US. The full impact of these tariffs is not yet known. 

The tariff blow had barely subsided when India was challenged again by sanctions on Iran’s Chabahar Port, a facility that India developed and operates.

Chabahar Port, perhaps, is the most important project that India has undertaken abroad, a critical part of India’s strategic connectivity. It provides India access to Afghanistan and Central Asia while bypassing Pakistan, with which India has long had hostile relations.

The port is also central to India’s trade strategy of linking with Europe and Eurasia through the International North-South Transport Corridor, in partnership with Iran and Russia, which will greatly reduce the cost of transporting goods from India to northern Europe through multimodal transport.

When US sanctions on Iran threatened this project, India, during Trump’s first term, obtained a waiver for Chabahar Port. Now that waiver has been nullified, as the Trump administration has reinstated sanctions on Chabahar Port, whose operator is an Indian state-owned corporation.

The Trump administration has turned the screws further, deliberately or not, on India with the steep hike of H-1B visa fees for migrant workers to $1,000. In recent years, an estimated 70% of H-1B visa recipients have been Indians. The US has become an increasingly important source of foreign remittances to India, with nearly 28% of remittances from Indian migrant workers coming from the US.

These high visa fees, which most migrant workers cannot afford, also make hiring Indian workers expensive for US firms, and are likely to sharply reduce Indian remittances. Foreign remittances are critical for India’s balance of payments, which runs a large trade deficit.

The shock of this series of actions to the Indian establishment has been huge. Trump single handedly upset India’s long-held assessment of its own relationship with Washington.

Since Barack Obama’s “pivot to Asia” to contain China, successive Indian governments have embraced US claims that ties with India would be among its most consequential relationships of the 21st Century. On this basis, India increasingly staked its economic strategy and foreign policy on a trajectory of ever-closer geopolitical alignment with the US.

As a result, the Indian government and establishment seem at a loss on how to react to Trump’s various announcements, which are not only going to produce an immediate economic fallout for India but also hurt its long-term economic and geostrategic plans.

The government’s reactions to the tariffs have been subdued so far. Unlike Brazil or China – where the presidents of both countries reacted strongly and openly to Trump’s threats, refusing to be threatened – the Indian prime minister chose to maintain silence while studiously refraining from talking about tariffs or the other issues.

Even though international media made much of Narendra Modi’s meeting with Russia’s Vladimir Putin and China’s Xi Jinping at the Shanghai Cooperation Organization (SCO) summit in Tianjin, there is little evidence that this represents any geopolitical reorientation on the part of the Indian government. Immediately after the summit, during the visit of Germany’s foreign minister, he declared in a joint press conference India and Germany’s commitment to a “rules-based world order” and the “freedom of maritime trade routes in the Indo-Pacific”. He went so far as to claim that China’s increasingly aggressive behaviour in the region is a cause for concern for both countries, while India’s external affairs minister watched in silent agreement.

Apparently, the Indian government is still betting India’s future on a closer alignment with the West.

Convinced of its vital role in helping the US contain China, the Indian establishment believed it could maintain strategic autonomy. This autonomy – a necessity for India’s economic and strategic needs – meant keeping good relations with US adversaries like Iran and Russia, a position it assumed the US would tolerate.

With Trump’s second term, the Indian elite clearly realised the costs of linking itself with the US: India can only be a subordinate ally. This means its national interests and sovereignty must be secondary to American priorities and the maintenance of US hegemony.

Though the Indian state resists this acknowledgment – hoping this difficult phase is merely temporary and attributable to Trump’s personality – it is facing a serious erosion of its capacity to direct its own economy and polity, safeguard its people’s welfare and maintain sovereignty. – Globetrotter.

Srujana Bodapati’s interest lies in agrarian relations in India, having participated in several studies around the country. She often writes about issues involving the Indian economy.

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