Wed, Jul 09, 2025
Even as Indian and American trade negotiators are working feverishly to complete a much-discussed early harvest trade pact by the second week of July, the US and India are poised to finalise a sweeping 10-year defence partnership that could transform the contours of global arms trade and military alliances in the Indo-Pacific.
The framework, which has been in the works since late 2024, marks the most ambitious realignment of India-US defence relations since the end of the Cold War, and is likely to be concluded by the end of 2025.
At the heart of this evolving pact is a joint ambition: To move beyond transactional arms sales toward a new era of co-development, co-production, and strategic interoperability. “As long as the agreements being negotiated benefit India, we should fast-forward these pacts,” pointed out Pinak R Chakravarty, former Secretary (Economic Relations) in the Ministry of External Affairs.
For India, which has long sought to diversify its weapons portfolio away from Russia, the US will offer advanced technology and strategic depth. For Washington, India’s coming on board will represent a vital counterweight to China's expanding influence across Asia, he pointed out.
The upcoming agreement — described internally as the ‘US-India Major Defence Partnership in the 21st Century’ — seeks to codify long-term predictability in arms sales, simplify export controls, and institutionalise co-development projects. US officials say the deal could pave the way for broader sales, including the coveted F-35 stealth fighter, though that remains a distant prospect.
Redrawing The Map Of Arms Trade
The deal is expected to overhaul existing US export controls — particularly the International Traffic in Arms Regulations (ITAR) — which have often bogged down Indian defence purchases with bureaucratic delay.
Indian officials have privately expressed frustration at the slow pace of licensing, maintenance approvals, and spare part shipments, even for equipment already delivered, which they point out doesn’t reflect India’s rising stature as a quasi-ally in the US strategic playbook.
Among the slew of agreements being negotiated are a Reciprocal Defence Procurement (RDP) arrangement, which would allow both governments to purchase from each other’s domestic defence firms, and a Security of Supply Arrangement (SOSA) to prioritise deliveries during global supply disruptions.
If ratified, these moves could grant Indian firms — both PSU firms like HAL and BEML, and private players like L&T Defence, Tata Advanced Systems Ltd, Reliance Naval & Engineering, and Adani Defence — a foothold in the Pentagon’s procurement ecosystem, a privilege historically reserved only for nations that are part of NATO or are US allies.
A key pillar of future cooperation would be technology collaboration, notably under the existing Defence Technology and Trade Initiative (DTTI) and the newer INDUS-X ecosystem. US defence giants are expected to partner with Indian counterparts to jointly produce systems like the Javelin anti-tank missile, the Stryker armoured vehicle, and components for General Electric fighter jet engines.
This defence realignment is part of a broader geopolitical convergence between the two powers. Both India and the US increasingly view an assertive China as the primary challenge of the 21st century, not only for them but also for the world.
Though India hasn't joined US-led security pacts like NATO or AUKUS, its participation in the Quad (alongside Japan and Australia) has long been taken to underline the two nations’ shared desire to uphold a free and open Indo-Pacific.
The Sweeteners: Guns & Oil
The long-term framework now under negotiation is intended not only to support India’s defence needs, but also to create a bulwark against coercion and supply chain vulnerabilities.
However, scepticism still prevails in Indian policy circles over India-US defence partnerships. The biggest fear in New Delhi is that the Americans may cut a separate deal with China, and leave India out in the cold, even as it draws closer to Washington, risking older friendships with other powers such as Russia.
Nevertheless, India’s trade negotiators believe the defence agreements, besides bringing India closer to the US for its Asia-Pacific pivot strategy, would also offset part of the trade imbalance that the US has long complained about. The US Trade Representative’s office calculates that the trade deficit with India was worth US$ 45.7 billion in 2024.
To that end, in recent months, India has also ramped up its crude oil imports from the United States — up from 1.7 million tonnes in January-April 2024 to 6.31 million tonnes during the same period this year — chipping away at the long-standing trade deficit that Washington often cites as “a cause for concern”.
Trade Pacts & Pressures To Remain
However, while the US may feel happier by selling more oil and arms, the conflict over trade can’t be swept under the carpet by New Delhi. The trade deal being put in place will be less than perfect, and both sides will be on the lookout for more concessions in the days ahead.
Right now, what is on the table and almost readied for signature are: Tariff reductions on processed foods, wines, and select industrial inputs, expanded quotas for US industrial exports at preferential lower duty rates, and easier customs and dispute resolution mechanisms which will cut through red tape for goods held up at ports.
In return, Washington is expected to keep on ice its planned 26 per cent retaliatory tariffs, a measure originally scheduled to snap into effect this summer. In Washington, industry groups are pushing for much more, of course.
However, India, for its part, has drawn some red lines while offering tariff cut sops on a range of products, from almonds, pistachios, cranberries and auto components, to high-end automobiles and select petrochemical products.
New Delhi’s hard lines are on dairy, grains, livestock, and digital regulation, which are not merely trade issues for it, but also political issues where concessions could trigger significant domestic backlash.
It has to be remembered that the only really serious movement against the Narendra Modi government till date has been the farmers’ siege of Delhi against reforms in the agriculture sector, which small farmers saw as an attack on them.
Digital Concerns
Concessions on digital privacy and protection also remain a bone of contention. New Delhi’s proposed Digital Personal Data Protection Act, its insistence on data localisation and tighter platform regulation, reflect a broader ambition: To craft a state-led, citizen-centric digital ecosystem. The US views these as protectionist policies that inhibit its firms from playing a strategic hand globally.
This divergence points to a deeper ideological rift. The US champions an open, enterprise-driven internet; India favours a guarded architecture, where the State retains strategic oversight. How this is bridged will be a key not only to future Indo-US relations, but also a guide map for other nations with similar concerns.
Intellectual property rights will also remain an area of concern for both sides. With the US’s moves perceived as limiting India’s ability to produce or export low-cost medications, it would be politically explosive, particularly in the Global South, where India is often dubbed the “pharmacy of the developing world”.
Strategic Drawing Board
Geo-economic considerations loom large. Washington views deeper trade engagement with India as a counterbalance to China’s economic dominance in the Indo-Pacific. For New Delhi, the US offers an essential partner in diversifying supply chains and gaining tech access, without the overdependence on Beijing.
Yet, trade — unlike security — lives in domestic economies. What diplomats promise in bilateral meetings must survive legislatures, lobbyists, and public opinion. Neither country has fast-tracked authority for this agreement, making ratification as complex as negotiations.