Opinion Express view on India-US relation: Hope ties with US hit reset, but hope isn’t strategy

US Commerce Secretary Howard Lutnick’s statement attributing the stalling of the India-United States bilateral trade agreement to Prime Minister Narendra Modi not placing a “call” to President Donald Trump, when the deal was “all set up”, is specious, to say the least. India was transparent about its concerns over allowing greater market access for American farm produce. It had clearly spelt these out, rightly or wrongly, as red lines in any trade deal. USTR Jamieson Greer flagged India’s offer as “forward-leaning” and “best ever.” Yet, the Trump administration, has been mercurial and unreasonable in clamping a 50 per cent tariff on goods imports from India, inclusive of a 25 per cent “penalty” for its purchases of Russian oil. There is a proposal for further raising the punitive duty to “at least 500 per cent” under a Sanctioning Russia Act, which is said to have received Trump’s support.

All this and now the senior US official’s claims, add insult to injury. More significantly, though, they point to the need for dialling down expectations — which the markets are already doing. Both the Sensex and Nifty fell 2.5 per cent last week, even as foreign portfolio investors have pulled out over $1.3 billion from Indian equity markets so far this month, on top of $18.9 billion in 2025. The rupee, too, closed at 90.16 to the US dollar on Friday. The renewed worries over US tariffs and progress in trade talks — not helped by the Republican Senator, Lindsey Graham’s, Russia sanctions bill and Secretary Lutnick’s remarks — and geopolitical tensions in Iran and Venezuela have contributed to an overall uncertain external environment. This comes amid an apparent “Goldilocks moment” on the domestic economy front, with an estimated GDP growth of 7.4 per cent for 2025-26, retail inflation at sub-1 per cent, multi-decade low bad loans of Indian banks, and healthy corporate balance sheets along with improved earnings and revenues.

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What can the Modi government do in the present situation? It must definitely keep the reform moment going. The Trump tantrums may have inadvertently pushed it to secure trade deals with other blocs, notify the four Labour Codes, previously in cold storage, and roll back the Quality Control Orders that were effectively non-tariff trade barriers. Much more needs to be done, especially on reforming the country’s inefficient market-distorting subsidy regime and fixing state government finances wrecked by competitive populism. Next month’s Union Budget will test the Modi government’s commitment to both reform and macroeconomic stability. With new Ambassador Sergio Gor settling in, one can hope for Washington to hit reset and refresh with NewDelhi, build on the substantial gains made in the bilateral relationship. One can hope for the US Supreme Court to bring some reason into the fraught debate on tariffs that Trump imposed under the International Emergency Economic Powers Act. One can hope for Trump’s lieutenants to look beyond a phone call, made and not made. But hope cannot be a strategy.