1. India must purchase more crude oil and liquefied natural gas (LNG) from the US.
2. India must procure defence equipment from the US, including F-35 fighter jets, and reduce its dependence on Russia.3. India must allow carmakers like Tesla easier access to the Indian market.
4. India must open up its agriculture and dairy sectors to American companies.
Tesla has already established operations in Mumbai. India has also reduced oil purchases from Russia, and Prime Minister Narendra Modi had agreed to shift part of that demand to the US, despite the high transportation costs of shipping oil from the US to India.
New Delhi has been recalibrating its defence procurement to reduce dependence on Russia over the past few years. According to a report filed in the US Congress, India’s purchases of Russian defence equipment fell to 36% between 2020 and 2024. Over a longer period, more than half of India’s military supplies originated from Russia.
In late 2024, the US Congress was notified about discussions regarding the sale of equipment worth $1.7 billion to upgrade India’s anti-submarine warfare capabilities.
Earlier this year, Hindustan Aeronautics Limited signed a memorandum of understanding (MoU) with Ohio-based General Electric to manufacture fighter jets for the Indian Air Force. The Modi government also approved the purchase of 31 armed drones from California-based General Atomics for $4 billion.
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Despite Trump’s assertions, there is no official confirmation that India has committed to purchasing F-35 fighter jets.
The only area where India appeared most reluctant was the agriculture and dairy sectors, which could directly affect its farmers.
Despite the concessions made, Trump has imposed a 25% tariff on Indian exports to the US. “If no deal is signed by September–October, we see a downside to the full-year GDP growth estimate for India by 20 basis points,” Garima Kapoor, Economist and Executive Vice President at Elara Capital, estimated. GDP stands for gross domestic product.
The US is India’s largest export destination, accounting for 17.7% of the country’s total exports as of the financial year ending March 2024.
“He’s strong-arming India. He has won decisive victories in negotiations with the EU and Japan, so his tail is up. He believes he can get his way, and that India is a relatively softer target. He thinks he can force India into submission. This is part of his bullying and domineering nature. What worries me is that he is in the process of damaging the India–US relationship, because the kind of mistrust this creates will linger well beyond his remaining term,” former diplomat Kanwal Sibal told India.
Opening India’s dairy sector to foreign players could have resulted in a decline of anywhere between 15% and 25% in milk prices, according to estimates. “If we assume a 15% drop in domestic milk prices, the total revenue loss would be ₹1.8 lakh crore. Assuming the farmer’s share is 60%, and adjusting for the change in supply due to the price drop, the annual loss to farmers comes to around ₹1.03 lakh crore,” Soumya Kanti Ghosh, Chief Economist at SBI Research, projected earlier this month.
That would be a steep price for farmers in a developing economy like India. Agreeing to this demand could have cost the Modi government significant political capital.
India exports less than $1 billion worth of food items to the US. Despite a high tariff of 17.4%, over a quarter of India’s dry fruit and nut imports came from the US in FY24. The trade imbalance in this segment already favours the US.
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While there may be other disagreements between the two sides, these four demands were the most prominent in Trump’s public messaging. While China’s control over rare earth magnets may have compelled him to allow Nvidia to continue selling advanced AI chips to Beijing, the US President appears to be leveraging the position he believes he holds over India.
“There could be other trade-offs that have been discussed earlier, including defence purchases, LNG, nuclear reactors—larger issues that may not yet be finalised. This may be a signal that we need to move faster or make a slightly better offer,” former diplomat Rahul Chhabra said.
Overall, the 25% tariff now imposed on India may shave off anywhere between 20 to 50 basis points from India’s GDP, according to various estimates. That’s equivalent to around $18 billion at current levels.
