Recent developments in 2025 have introduced fresh uncertainty in India’s relations with the United States and China. The US administration’s new policy stance on India has created ripples across diplomatic, economic, and strategic spheres. Meanwhile, China has unexpectedly voiced support for India’s strategic autonomy. Pakistan has forged a surprising new rapport with former US President Donald Trump, including offers related to cryptocurrency and critical mineral resources. Against this complex backdrop, India faces multifaceted challenges in preserving its key international partnerships.
Economic Ties and Trade Dynamics
India remains the US’s largest trading partner with bilateral trade reaching $131.84 billion in 2024-2025. India enjoys a trade surplus of $41.18 billion, with exports to the US representing about 20 per cent of India’s total exports. MSMEs produce 80 per cent of these exports. Any disruption in trade or tariffs could severely impact sensitive sectors of the Indian economy. The European Union’s stricter quality standards limit its potential as an alternative market. Additionally, remittances from the Indian diaspora in the US form 30 per cent of India’s total $135 billion inflow. Targeting work visas could reduce remittances and cause job losses in India’s service sector, which contributes over 50 per cent to GDP. Student visa reductions, notably a 44 per cent drop in F-1 visas in early 2025, threaten access to advanced education and reduce US revenue from Indian students.
Defence and Security Cooperation
Defence ties have expanded with agreements such as LEMOA, COMCASA, BECA, and the Security of Supply Agreement (SOSA). The finalisation of the Reciprocal Defence Procurement (RDP) deal could further deepen cooperation. Joint military exercises have increased and US defence imports strengthen India’s military capabilities during its industrial maturation. US analysts caution that India’s global influence may be overestimated and that deterring China requires close US partnership. However, recent tensions have affected the renewal of the 10-year Indo-US Defence Framework Agreement. Both nations have invested political capital in multi-dimensional engagement despite emerging frictions.
Strategic Autonomy and Multipolarity
India’s insistence on strategic autonomy conflicts with the US drive for global dominance. India advocates for a multipolar Asia free from domination. The Make in India initiative complements rather than contradicts US onshoring efforts due to differing cost structures. US demands for access to India’s agriculture and dairy sectors threaten vulnerable livelihoods. India’s defence imports from Russia have declined from 80 per cent to 34 per cent, but legacy dependencies remain. India’s democratic values and moderation contrast with its BRICS partners, even as it faces criticism within the group.
Technology, Digital Sovereignty, and Geopolitics
New initiatives like the US-India COMPACT and TRUST aim to enhance military and technological cooperation. Yet, Trump’s techno-nationalism and punitive tariffs pose challenges. India seeks to maintain digital and data sovereignty amid US tech dominance. The US claims credit for the May 10 India-Pakistan ceasefire, but India maintains its principled opposition to third-party mediation. India continues to engage actively in the Quadrilateral Security Dialogue (Quad), including naval exercises in the South China Sea, reinforcing its Indo-Pacific commitment despite bilateral tensions.
Questions for UPSC:
- Critically discuss the impact of strategic autonomy on India’s foreign policy in the context of rising global multipolarity.
- Analyse the economic implications of trade imbalances and visa policies between India and the United States on India’s service sector and MSMEs.
- Examine the role of defence agreements such as LEMOA, COMCASA, and BECA in shaping India’s security architecture and regional power dynamics.
- Point out the challenges and opportunities posed by digital sovereignty and technological cooperation between India and global powers like the United States.
