MAGA Dials MIGA
President Donald Trump and Prime Minister Narendra Modi unveil an ambitious new blueprint to deepen and scale India-US relations. EPISODE #214
Dear Reader,
A very happy Monday to you.
Last week, President Donald Trump hosted Prime Minister Narendra Modi for a summit meeting in the White House.
Despite deep differences over tariffs and immigration, the two sides struck out to etch a new chapter in India-US relations—the history of which can be traced back to the moment then Prime Minister Atal Bihari Vajpayee decided to cross the Rubicon and boldly bid for a strong relationship with the US.
The outcome of the meeting was succinctly summed up in PM Modi’s penchant for acronyms: MAGA (Make America Great Again)+ MIGA (Make India Great Again)=MEGA. The trick though is for both sides to walk-the-talk. Also, the topic of my newsletter this week.
The cover photo is sourced from the Press Information Bureau.
Happy reading.
The Bromance
The first term of President Donald Trump witnessed some incredible bonding with his Indian counterpart, Prime Minister Narendra Modi. Political showstopper events like “Howdy Modi” and “Namaste Trump” are now part of diplomatic folklore.
The question was whether the two leaders would be able to rekindle this bonhomie in President Trump’s second stint, which began little over two weeks ago?
After all, in the four years since, US-India relations entered a difficult phase, especially with the administration of President Joe Biden playing wink-wink with the American deep state and its questionable actions to undermine Indian democracy. Coincidentally, this is very similar to what went down in the previous presidencies led by the Democrat Party—whether they be under Bill Clinton or Barack Obama. It is not that the relationship did not move forward. It was a case of two steps forward, one step back.
Surprisingly, both sides rose to the occasion and generated the right optics. The mutual serenading commenced in Paris, when PM Modi met with US Vice President J D Vance and his family on the sidelines of the AI summit in Paris. The White House meet took this to another level.
Diplomatic manoeuvres rarely show immediate results in the report card. It is inevitably a work in progress. In this dance, optics are very important. Especially, since everyone, including the two countries, are reading between the lines for clues. It is always a WIP (work in progress).
In this sense, this visit was a cinch: The Bromance is Alive.
Tariff Trump
If President Trump has one consistent calling card, it is his beef with imports. In the Trump world view, this is the singular reason undermining the US economy and its leadership of the world.
For almost 40-years now, including a famous conversation with Oprah Winfrey, he has consistently argued his case that America is not treated fairly by its trading partners. Initially, his rant was about Japan. Once, he became President, the target was China. In his second term this has been extended to friends, allies and foes alike.
However, this binary view of trade ignores the downside: domestic inflation and shocks to the rest of the world—which is already reeling under the back-to-back economic shocks it has suffered since the covid-19 pandemic hit the world. In the fortnight since President Trump took charge, we have been witness to the latter, manifesting in another round of depreciation of most international currencies, including the Indian rupee.
As the largest economy in the world at $30 trillion, these unilateral actions ignore the political economy of the world economy. Most countries with substantially smaller economies are struggling to stay afloat. Shocks like punitive tariffs imposed by the United States can tip these countries over the edge.
At present, the US has insulated itself from the rest of the world and has insulated itself to such global shocks; or at the least minimised the impact. Its imports of energy are minimal, given that it is the world’s largest producer of oil, followed by Saudi Arabia and Russia. President Trump’s industrial policy, MAGA (Make America Great Again), now wants to take this to the next level.
In this backdrop, India played its cards right. And that too ahead of the summit meeting.
The just presented Union Budget undertook another rejig of import tariffs. In her first Budget in NDA 3.0 presented in July last year, FM Nirmala Sitharaman had removed seven tariff rates. The latest Union Budget eliminated another seven customs tariff rates. Consequently, India now has eight tariff slabs, including the zero rate, signalling that it is willing to accommodate the Trump view on trade.
Win-Win
Further, India’s negotiating position has witnessed a key pivot since 2014. The administration led by PM Modi now approaches international negotiations as part of the solution. Previously, India always cast itself as part of the problem. This inevitably led to walkouts from global negotiations, which earned the incumbent government domestic political brownie points at the cost of eroding India’s position on the global high table.
This pivot, wherein you both give and take, was initially gradual, but has acquired momentum in recent years. Exactly why India is now part of the global high table, with the high point being its hosting of the G20 deliberations in exceptional global circumstances.
Gradually, India has begun to acquire a sense of self-confidence. As its economy has grown in stature—it is now the fifth largest in the world—so has its ability to engage in give-and-take. In the just concluded summit meeting, you saw this play out.
The country chose to address America’s concerns on its trade deficit with India, by agreeing to import crude oil and defence items, and work out a limited trade deal by the end of the year.
Similarly, the US agreed to honour the commitment of the Biden administration and maintain the transfer of technology and widen the scope of defence exports—dangling the sale of the F-35 stealth fighter aircraft as a carrot.
Effectively, both sides could claim victories. For Trump, it was particularly satisfying to publicly beat up India in the presence of PM Modi on tariffs and then showcase the concessions, especially the promise to grow bilateral trade to $500 billion.
Interestingly, the bedrock of this relationship is technology and defence. As they say money talks and is the best glue. I had flagged this in a recent newsletter. Sharing it below, in case you wish to re-read it.
Walking The Talk
Clearly, the US and India have moved swiftly to draw up deeper contours of their partnership under the three-week old presidency of Donald Trump. This relationship is very young. It began under Prime Minister Atal Bihari Vajpayee, who took the politically bold step to dump the idea of so-called non-alignment and reach out to President George Bush to deepen the relationship with the US, crossing the Rubicon as it were.
Both sides have traversed a long distance since then. The latest confabulation proposes to scale this relationship to new highs.
But the trick will be in walking the talk. Especially for India. Its ability to honour its commitments on tariffs and cater to more aggressive demands from an emboldened US administration, rests on the shoulders of Indian industry.
At present, for a host of reasons, it is one of the least competitive in the world. Worse, since 2008, when the global financial crisis occurred, India Inc has been in a funk with respect to new investments. Even now, when they sit on huge cash piles, India Inc is loath to invest—preferring to hedge its bets.
This reluctance is understandable, given the uncertainty in geopolitics and geoeconomic fragmentation. But the thing is that this is the new normal. These risks are here to stay. India Inc has to work out the silver lining in this cloud.
There are enormous opportunities out there as technology disruptions and shifting geopolitics continue to unravel the old order. For instance, this is carving out new international trade routes. And, India with its newfound maritime ambitions (watch my latest post on StratNewsGlobal.Tech shared blow), is central to these new trade routes. Understandable, given that the centre of the world has, with the rise of China, shifted to the East.
Time therefore for India Inc to shed its diffidence and seize the moment. Inaction is no longer a choice: Shape up or ship out. Foreign businesses are at the gates.
Recommended Viewing
Sharing the latest episode of Capital Calculus. (Please note that Capital Calculus has moved to a new home (stratnewsglobal.tech) within StratNews Global. This relocation will take a bit of getting used to—bear with me.)
You would be shocked to learn that India, which has an enviable history of shipping and seafaring, today accounts for only 1.2% of global shipbuilding capability. Worse, for decades India underestimated its marine frontier by a staggering 40%—a mistake that was corrected in 2023-24.
Now, India wants to play catchup in a hurry. It wants to grow its share in global shipbuilding 10-fold in the next 10 years. The just presented Union Budget included incentives to nudge this audacious ambition. Can India pull this off? Is this a case of too little, too late?
To answer this and more, I spoke to Arjun Chowgule, executive director, Chowgule Group. According to Arjun the task of growing India’s shipbuilding capability ten-fold in the next 10 years is daunting, but not insurmountable. At the least, this heavy lifting requires a reset in the way Indian banking finances shipbuilders. Sharing the link below.
Do watch.
Till we meet again next week, stay safe.
Thank You!
Finally, a big shoutout to Gautam, Premasundaran and Aashish for their informed response, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by all readers. Gratitude to all those who responded on Twitter (X) and Linkedin.
Unfortunately, Twitter has disabled amplification of Substack links—perils of social media monopolies operating in a walled garden framework. I will be grateful therefore if you could spread the word. Nothing to beat the word of mouth.
Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.
A topical subject of great importance has been chosen by you this week Anil. US and India coming closer was triggered by the 9/11 attack in September 2001. The reference to terrorists as "gunmen", "freedom fighters" or "separatists" in the Western media, when terrorism was part of daily life in India, changed to calling a spade a spade and currently President Trump has openly identified Islamic terrorism as a source of evil and threat to humanity. Coupled with this the common threat from China, makes the oldest and largest democracies, natural allies, in the foreseeable future. The US has no option but to help build the defense capabilities of India, as it is the only country that has faced Chinese aggression since the last 65 years. Of course the US is also enhancing the defense capabilities of the Philippines, Taiwan, South Korea, Japan and Australia; as a larger group of countries, that are facing the bullying of the dragon, in the South China sea and beyond. India may purchase a few F 35 aircrafts from the US, as a temporary solution to the absence of 5th generation stealth fighters; but may opt for SU 57 Russian stealth aircraft, if they agree to the required transfer of technology, for a make in India project. By helping Zelensky to continue fighting Russia, President Biden has pushed Russia into a defense pact with China. The situation is now tricky for India, as depending on Russia for defense equipment supplies, during any confrontation with the Chinese, may not be advisable. Ultimately, the make in India, during the next decade, has to come through, for a self reliant power. Leadership of PM Modi is critical for India to sail through smoothly in the complex situation ahead. The US is trying to build a military base in one of the many islands that are part of Bangladeshi territory and a soft US approach towards Bangladesh may be seen in the future. Thank you Anil for sharing this very interesting article.
Well done! A really well written column describing in a pithy manner the evolution of the relationship in the last 25 years. Your conclusion is on point.