Indo-US Defence Deals May Hold Key To Conclusion Of Trade Pact

The two democracies have set a bilateral trade target of US$ 500 billion by 2030, and a key part of the rise in trade figures is expected to be driven by defence purchases. Some of the play-offs for concessions may also come by way of military cooperation.

However, New Delhi needs to tread with caution, even as the US is keen to show results on trade deals, especially with the Donald Trump administration’s announcement of a 90-day pause on reciprocal tariffs, said experts and stakeholders.

While India will have to play its cards with deftness on sensitive sectors like agriculture, dairy and micro, small and medium enterprises (MSMEs) — as there will be “big opposition” if New Delhi does not continue to protect these, an insider said pressure to open these sectors in a blanket manner will be "huge".

Indo-US Defence Cooperation: Give And Take?

Many believe that along with the possible trade deal, Washington will try and utilise New Delhi’s resources for the recently launched US-India COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology) pact, signed during Prime Minister Narendra Modi’s US visit in February.

Modi and US President Trump sought to deepen overseas deployments of Indian and US militaries in the Indo-Pacific, along with enhancing logistics and intelligence sharing. The two leaders also agreed to improve force mobility for joint humanitarian and disaster relief operations, along with other exchanges and security cooperation engagements. 

A White House statement noted that trade relationship must fully reflect the aspirations of the COMPACT. 

“India is ready to give special tariff treatment to many US products, but Washington is not in a position to utilise the benefits for most items,” Arun Goyal, trade expert and director, Academy of Business Studies, told The Secretariat.

India has already reduced tariffs for several goods, including synthetic flavouring essences and fish hydrolysate, etc., besides high engine-capacity motorcycles and bourbon whiskey.

“The US needs India for its own foothold, especially in the South China Sea and Malacca Strait, considered China’s backyard, apart from the Indian Ocean. Washington will have to depend more on India for the same,” Goyal said, adding that New Delhi needs to charge a suitable fee for the security exercise.  

“It may ask for direct cooperation with India by way of patrolling and providing a force from our Andaman command. If this is part of the agreement, we should demand compensation for services rendered,” he said.

Vance’s Visit To India

US Vice-President J D Vance’s visit to India earlier this week raised hopes for an amicable and timely conclusion of the BTA. Earlier, a report by The Secretariat said that both India and the US are keen to conclude the trade pact by October.

“We are absolutely clear about the trade talks, and are committed to signing the trade pact by October-November,” a person familiar with the developments said. Rajesh Agrawal, Additional Secretary, Ministry of Commerce and Industry, will play a key role in handling the talks on the pact.