India’s Reset with United States, Warmth with Europe, Engagement with Gulf

In this episode, Host and TAG Senior Advisor Mira Rapp-Hooper speaks with Ashok Malik, TAG partner and chair of the India Practice, about India’s evolving diplomatic and economic relationships with the United States and Europe. They assess whether the Trump-Modi meeting on the sidelines of the G7 Summit in France marked a meaningful reset in U.S.-India ties, why trade negotiations remain tied to Washington’s tariff uncertainty, and how New Delhi is approaching the next phase of engagement with the Washington, D.C. They also explore India’s growing alignment with Europe and the opportunities emerging in tech, defense, energy, manufacturing, and supply chain resilience. 

What Comes Next with Mira Rapp-Hooper is produced by Rivan Dwiastono, executive produced by Lauren Dueck, with editorial input from Prashant Jha. It contains music by Cody Martin via Soundstripe. 

What Comes Next is a production of The Asia Group, and is powered by TAG AI, TAG's geopolitical decision engine for businesses.

Transcript

SPEAKER_00 0:00

There were a few strange remarks in that meeting. President Trump does exaggerate at times and does come up with statements that are not orthodox diplomatic statements. Having said that, those statements were not negative vis-a-vis India, which would lead us to believe that he's looking towards a trade deal with India. India has diversified.

SPEAKER_01 0:58

Ashok Malik is a partner here at the Asia Group where he oversees the firm's practice in India. He has years of experience in government and in business and will help us digest what has just gone on. Ashok Malik, thanks so much for joining us on what comes next?

SPEAKER_00 1:14

Thank you, Amira. Great to be back.

SPEAKER_01 1:17

Well, I've been looking forward to chatting with you since I saw these readouts coming out of President Trump and Prime Minister Modi's meeting on the sidelines of this G7 summit meeting in France last week. Of course, the readouts and the reports out of the meeting were very warm with President Trump expressing admiration and a great deal of affection from Prime Minister Modi. But then at the Asia Group, we're always looking at the question of sort of what lies beneath the surface and what really came out of that particular meeting. As you've been helping us to understand better than anyone, the United States and India, of course, have had a complicated relationship over the course of the last year plus, notably with US trade tensions with India reaching a new high at one point, with tariffs as high as 50%, although they're down to much lower levels now. How much did this warm interpersonal meeting between Trump and Modi do to really reset or rewarm those ties that had become so cold? And with the US and India trade teams set to meet again this week, what should we understand as the next steps towards a real US-India thaw?

SPEAKER_00 2:32

Thanks, Pira. Those are great questions. Let me begin with a bit of a background. One year ago, this time one year ago, the relationship was moving into very, very stormy waters. There were all sorts of statements coming out of not just the White House, but uh from people adjacent to the White House, from uh Peter Navarro and many others. Uh there were differences of opinion uh on the India-Pakistan conflict, uh, there were differences of opinion on uh the energy trade India has had with Russia, with support from previous US administrations uh through the Ukraine war. There were differences of opinion on India's protectionism or alleged protectionism. Uh I'm not suggesting all of that has gone away and uh uh memories do persist. Uh having said that, I do believe both sides, working-level uh officials on both sides have made a strenuous effort to manage the relationship and build it back. Uh we are far from uh the ceiling, from aspiring to a soaring ceiling, which was the ambition, say two years ago. But we are at a very manageable flaw, and both sides have worked hard to manage that flaw. Prime Minister Modi, Minister Jai Shankar here, uh, the Trump administration team, particularly Secretary of State Rubio, other officials, Ambassador Gore here, Ambassador Quatra in Washington. I do believe a lot of effort has been made. And the the meeting between Prime Minister Modi and President Trump in France, a year and a half or a year and a bit after they met in February in Washington was an outcome of that effort. There were a few strange remarks in that meeting. Uh, President Trump is uh does exaggerate at times and does come up with statements that are not orthodox diplomatic statements. Having said that, those statements were not negative vis-a-vis India, which would lead us to believe that he's looking towards a trade deal with India. Now, where are we on the trade deal? India and the US did agree to some sort of an interim arrangement or interim agreement in February this year. Following that, shortly after that, the US Supreme Court struck down the tariffs, and the entire tariff architecture has to be rebuilt using provisions such as 301 and other provisions, which is what the Trump administration has doing. Now it has to rebuild the trade architecture of that tariff architecture, I'm sorry, not just for India, but for numerous other countries, for all countries really. And while the text of the India-US interim trade agreement or the first tranche of the trade agreement is more or less final. If you speak to the Indians, they say it's final. If you speak to the American side, they say we are almost there, but not quite there. Uh, I guess trade negotiators will never admit to something being final till it till the someone puts a gun to their heads and says, sign it. Now, the fact is President Trump is not in a position to put a gun to his trade negotiators' head and say, sign it, because the tariff architecture, the legislative architecture, the legal architecture is not ready. And till India knows what uh the tariff is for countries that compete uh in the categories in which India exports to the US, such as textiles, uh, gems and jewelry, and so on. Uh till India knows that number, till the tariff architecture is back in place for numerous countries, we can't sign that deal. And that is where we are. This process is a bureaucratic process in Washington. It could take two weeks, it could take six months. I don't know. You know the bureaucracy in Washington better than I do. So that's where we are.

SPEAKER_01 6:14

That's a great way of putting it, Ashok. And I think just for our listeners' benefit, as you laid out, is you know, it's worth knowing that after the Supreme Court struck down the use of AIPA as a legal basis for the tariff regime, the Trump administration noted as you have, um, has been cobbling back together pieces of that tariff regime. Um, but of course, because the US India trade framework was not finalized at the point that AIPA was struck down as a legal basis, counterparts in New Delhi have been very circumspect. They have sort of um waited, paused to see what new authorities would be invoked, and as you said, on which product categories, so that they can really know what they're negotiating against and certainly avoid negotiating against themselves. Um, certainly when the AIPA tariffs were struck down, the threat of India being subject to a 50% tariff was no longer feasible. So they were given a little bit more freedom of maneuver. Um, and now they're watching and waiting to see what comes out of 301, 232 investigations and other legal authorities that can be used to reconstruct those tariff regimes. But exactly as you say, that's taken some of the leverage out for the Trump administration. Um, because if Indian negotiators know that they have to wait to see what's really legal in this new US system, urgency kind of seeps out um of the framework quite a bit. Nevertheless, Ashok, I wouldn't oh, go ahead, please.

SPEAKER_00 7:38

Especially since the relationship is not getting worse anymore. In fact, uh, even if it's not getting much better, it's stable. And that's given uh external stakeholders, business stakeholders, some comfort. So if there's a trade deal in the works somewhere down the line, and the political rhetoric is manageable.

SPEAKER_01 7:56

So that's it's a really important point. We are sort of no longer spiraling. Um, there was sort of a stinting of this relationship, and therefore, um, you know, the passage of time, it was not to India's disadvantage. Nevertheless, I wonder if you could just help our listeners understand what you think the last few remaining items are likely to be in that trade framework agreement, understanding that we can't impute where the US tariff regime is actually going to come out in the next few weeks.

SPEAKER_00 8:27

You know, to be honest with you, uh uh there are a number of issues that still need to be uh discussed in terms of the broader trade relationship, including uh the digital technology trade, uh, e-commerce, uh, well, AI frontier models, uh, where that comes in, uh, it uh in Indian access to US digital companies, but all of that, and that is really uh the meat of 21st century trade, uh, as opposed to merchandise trade or goods trade, which is really yesterday's trade, uh, with due respects. Uh, all of that is part of negotiations following this interim of first trans trade agreement. And that is where uh most of our clients at the Asia Group, or most forward-looking uh business thinkers, uh, are concentrated. So they actually want this out of the way. Uh, why has this been delayed? To be honest, if we if the US has a legal architecture in place for a number of countries, countries that concern India and India itself, uh, this trade deal can be signed very quickly. I do believe Washington grappling with putting together a legal architecture to compensate for the the Supreme Court's judgment is the principal hindrance at the moment.

SPEAKER_01 9:50

That's not an easy process. Yeah, no, that's that's really helpful. And as you say, it could be weeks, could be months. Um, and that's not just about India, that's about all of the outstanding parties where the United States is looking to cobble back together a tariff regime on legal grounds. I wonder um if we could zoom out a minute, Ashok, because of course this US-India warming that we saw taking place between the two leaders is occurring in a broader geopolitical context that has been quite complex for India. And there I'm thinking, of course, um the recent war with Iran, um, the tenuous ceasefire that has now been negotiated, um, and the fact that whether because of its commodities dependencies in the Gulf or the fact that there are huge numbers of Indian workers in the Gulf and in Gulf countries, India's stakes are fundamentally different than the United States when it comes to that conflict with Iran. Um, and India has clearly seen some economic turbulence introduced by the last several months. Help our listeners understand how India as a government and businesses with interests in India have been reacting to both the conflict and the ceasefire, and how that affects positioning around the bilateral relationship, too.

SPEAKER_00 11:11

So uh there are four principal stakeholders in the conflict. Uh Iran, Israel, the US, and uh uh the Persian Gulf Arab states, uh the UAE, Saudi, and so on. Uh, India has relationships of uh varying degrees with all of them. Uh it has economic relationships and political relationships with all of them. I dare say the economic relationship with Iran is the weakest, though it's not non-existent. Uh uh in fact, during the the COVID uh pandemic, uh Iran used Indian-made vaccines. They use a lot of our healthcare products for their primary healthcare. So India actually has stakes in all of these countries. Uh three of them are close neighbors in a sense. Um there are 9 million or 10 million Indian guest workers in the Arab countries. About 4 million of them are in the UAE. In fact, there are more Indians in many of those countries than local residents, though the local residents are citizens and Indians are just workers. Indians work across the spectrum, uh, from construction sites to C-suite. Uh India imports a lot of energy from the Gulf or through the Gulf. Adjacent commodities also produced as part of the energy ecosystem, uh, from helium to propane. Then uh increasingly Indian manufacturing exports and agricultural exports go to these countries. Uh the, in a sense, oil for food or energy for food is the great balance uh and the great bridge between India and the UAE or India and Saudi Arabia, where India is part of their food supply chain and they are part of India's energy supply chain. Uh then Indian manufactured goods, whatever we do manufacture, whether it's it's small cars or iPhones and mobile phones, more recently, or uh various types of textiles, including industrial garments, uh, find a big market in these countries. Indian exports to Africa are routed through Gulf ports. So uh countries such as the UAE are not just neighbors, they are part of India's broader uh economic uh strategy. And if uh the UAE gets affected, or if Bahrain gets affected, or if Oman gets affected, or if Kovit gets affected, the Indian consumer, the Indian manufacturer, the Indian economy gets affected. Uh so uh in a sense, uh we have a big stake and we have felt the pain. The immediate challenge for the government has to has been to diversify energy sourcing. Uh there has been some energy flowing in from uh the Gulf region because the state of hormones opens and shuts again, then opens again. Um but India has diversified. Uh the US actually has become a much bigger source of energy in in recent months. It is our biggest, uh currently our biggest uh gas supplier displacing uh uh Qatar. Uh even LPG. Uh we hardly bought any LPG from the US in January, but last month, in the month of May, 55% of India's LPG imports were from the US. Uh 12% incidentally were from Iran. So this is a strange war because historically, wars, uh consequential wars changed maps and changed political territories. This war has changed supply chains. Now, some of that change will go away when peace returns, or maybe a respite returns, I'm not sure whether peace will return. But some of those new supply chains will persist. Uh, and especially energy supply chains, not just for India, but for much of the world, are being completely redrawn by this war.

SPEAKER_01 15:00

And and as you say, Ashok, um, you know, I think the Strait of Hormoose Closure is one of several instances that we've had in the last couple of years in which the world has learned very hard lessons about how global choke points can be used to devastate global uh supply chains and economies. And while it is the case that um ceasefire creates some respite, it's impossible to unlearn the lessons of the closure of Strait of Hormuz. How much do you think we'll see these changes to India's supply chain continue to diversify in the coming months? And say a little bit more about what that looks like. Does it look more um like a domestic return to coal, um, as you say, uh increasing reliance on the United States? Of course, there's been uh kind of a new ability of India to depend on Russian commodities. Um, so a few months from now, how do you think those supply chains look for India?

SPEAKER_00 15:56

Like any other country, I think India will attempt to diversify uh to build resilience. So if you look at Russia, for instance, we do buy some crude oil from Russia, but we've done that with the US waiver. We've been uh conscious not to breach the the US uh sanctions uh on those two major Russian oil uh companies. Uh we do source fertilizer from uh Russia, we source fertilizer from African countries, we source fertilizer from Saudi Arabia, we source fertilizer from uh the Gulf countries, we source fertilizer from uh uh Africa and China. So uh, you know, I guess that that diversification will continue a pace in other commodities as well, so that if if for political or economic reasons one supplier decides he or she or it can't supply that commodity, that other uh windows open up. Uh with energy in particular, you could be moving into a situation very quickly if the war ceases, uh even for some time, where from energy scarcity uh you use, you move to an energy glut. That can happen. I know this sounds strange, but we could just be at the cusp of it. Uh both the UE and Saudi Arabia are investing heavily in new pipelines and ports, uh, which even in peacetime uh could be commercially viable. And again, uh some of those are rooted towards India and markets in Asia more generally, but India as well. Uh finally, uh the resilience strategy for again countries like the UAE, which is probably our most important partner in the region, uh, post-war includes India. Uh already there's talk of more uh co-storage of uh uh crude oil reserves for both countries in Indian territory. Uh there's also talk of uh the the UAE's uh digital embassies program uh and data center program uh being mirrored in India simply to build resilience. Uh in fact, some of our clients at the Asia Group have been talking about that as well, and we're working with them. So uh there will be challenges after this war because there'll be a lot of rebuilding to do, but there will also be opportunities as any war and any big political upheaval does throw up.

SPEAKER_01 18:24

It's sort of picking up on that question about opportunities, but shifting our geographic focus just a bit, Ashok. I also want to get your take on um the extreme sort of blossoming we've seen in the relationship between India and Europe. Um, I've just been twice um on trips to Europe myself. And it's sort of hard to um contain European leaders' excitement about um how fast and furious the relationship with New Delhi appears to be growing and changing. Um, of course, we had the India-EU trade deal a few months back. Now that was years in the works, um, but a huge achievement um for all the parties involved. And then on the sidelines of the G7, the Modi Macomb meeting in Nice produced dozens of individual concrete deals across a wide range of sectors, ranging from defense to critical minerals to civil nuclear energy, AI, supply chain resilience, all of the areas in which you want to see your partners working. How from an Indian government and Indian commercial perspective is Europe being viewed at this moment in time? And what are the concrete opportunities that you see businesses should be positioning themselves to try to take advantage of as this relationship or set of relationships really enters a new chapter?

SPEAKER_00 19:51

Again, India and Europe or the EU, but not just the EU, even the EFTA countries, and you already have an FTA with the EFTA countries, uh see each other as part of each other's resilience, a mutual resilience and mutual diversification at a time when uh the American posture under uh the Trump administration and the Chinese posture uh are both challenging in different ways. Uh Chinese market access is not what it used to be. American market access is not what it used to be. Chinese ability to uh block supply chains is enhanced, and a concern of the geopolitical impact of uh certain US actions in recent times have also been challenging. Given this, the the India-EU FTA, which you quite correctly have characterized as being in the works for years, even decades, uh acquired a certain momentum at the beginning of this year, or perhaps late last year, when both sides realized, I guess the EU realized more than India, but India too, that some FTA was better than no FTA. And the wait for the ideal FTA uh could take another 20 years, but could no longer uh delay urgent action at a time when uh both countries needed options uh to traditional uh partners such as uh China and uh the US, as well as needed to send a strategic signal to perhaps their own people. Um the interesting thing is uh uh India's always had strong bilateral relations with France, uh with Germany and even Italy. But when it came to negotiating an FTA all these years with the EU, it was the business interest of the German auto industry, sometimes of some French winemakers or of Brussels bureaucracy that came in the way. Uh while smaller countries were less bothered, smaller countries in New Orleans. Uh now the trade deal is going ahead because the big four as It were, uh, Brussels, Berlin, Paris, and Rome have invested in it strategically. And all the other, the remaining of the 27 countries uh need to be brought on board. So uh a lot of the Prime Minister's uh visits, Prime Minister Modi's visits in recent months, or Minister Jai Shankar's visits in recent months, have been to smaller European countries. Uh the Prime Minister did go to France, the G7, yes, but he also went to Slovakia, becoming the first Indian Prime Minister to visit Slovakia since it became an independent country in the early 1990s. Uh and uh just before that, Minister Jai Shankar was in Finland. So uh about every European country has been visited or will be visited in the course of this year to uh assure them that there is a stake for that country as well in this broader trade deal and they're not just being pushed into it by bigger European powers, and that India has something to offer them as well. Uh so in that sense, uh uh Europe is going to become a much closer partner uh for India uh in terms of technology, including AI, uh, because it comes without some of the challenges we faced uh in the US in recent times. Uh as uh Europe invests in defense, there is scope for supply chain linkages as Indian Defense Manufacturing also uh moves up the value chain. Uh there is uh scope for cooperation in uh uh a variety of manufacturing industries. Uh India is hungry for many types of components and commodities. The the US is a supplier, of course, it will be after the beat after the BTA, but Europe is also a supplier. And sometimes Europe competes with the US. Let me give you one example of a company we are familiar with. Uh it's a US company in the chemicals business. It has uh manufacturing facilities in Europe as well as in the US. If uh India signs an FTA with Europe and doesn't sign the BTA with the US, then the same American company will be exporting to India not from its US factory, but from its European factory. Now uh will that make any difference to the company's Poplide? No. Will it make a difference to American jobs vis-a-vis European jobs? Yes. Uh the same goes for something uh uh as delightful and everyday as whiskey. So does India import, you know, India is a large country with a lot of whiskey drinkers, but relatively few imported whiskey drinkers or people who use they can use Bourbon to mix their cocktails or they can use scotch. Uh the UK FTA is being signed on the 15th of July, I hear. Uh the US FTA or BTA is uncertain. So, you know, the early mover will have an advantage.

SPEAKER_01 25:06

It it's a great point, Ashok. Um, and I really like the point that you made about the sort of blanketing of high-level Indian diplomacy that we've seen across the European continent. Because, of course, um, this comes amidst a set of dynamics that all of these markets are facing. Shortly before the G7, um, we spoke about the way that the second China shock, so-called, is landing in Europe when high US tariffs mean that more Chinese goods flood European markets. Um, so I do think this is a moment not just of incredible uh EU and European opportunity with India, which of course it is, uh, but a moment in which we're seeing a broader set of understandings emerge about strategic and economic alignment between Europe and India, um, in ways that were always there, but that have really been brought to the fore by the geopolitical flux that we've seen over the course of the last couple of years.

SPEAKER_00 26:07

Absolutely. Uh I guess uh, you know, you will recall uh Ronald Reagan's famous maxim trust, but uh verify. Uh I think we've moved into an era where uh you do trust traditional partners because you have to and you must, but you trust and diversify. And both India and Europe are attempted to do that.

SPEAKER_01 26:31

Absolutely. Uh on that score, I want to take us back to the India-US relationship for a minute, Ashok, um, and at the strategic level, because of course we've been talking a lot of trade deals, new economic arrangements, uh promising new partnerships. But along with the meetings at the G7 last week, we also saw an announcement that I'm curious how it played in India. And that was, of course, the announcement that the United States was returning to the moniker Pacific Command, the US Pacific Command, as opposed to US Indo PAYCOM, um, which of course was um nomenclature that had actually been given to Indo-PAYCOM by the first Trump administration. There is a fairly strong symbolism in the removal of Indo from PAYCOM, um, because the injection of that nomenclature had intended to express um united theater that very much includes and still included India, um, but that included India sort of facing East and increasingly acting as part of East Asia. I wonder how significant this announcement has been taken to be in New Delhi. Um, and to what degree you think it really matters in the way that the Indian government thinks about its own strategy in this period of multi-alignment that we are increasingly dissecting here.

SPEAKER_00 28:07

You know, the strange thing is the geographical mandate of PACOM or Indo-PAYCOM, and now again PACOM, didn't change with any of the name changes. Okay, it remains just the same. And uh the Indo-Pacific remains two oceans which that converge. Uh and at some point you can't tell one from the other. Indo-Pacific remains important for India, remains important for Australia, which uh is washed by the waters of both the Indian Ocean and the Pacific Ocean, and remains important for Japan. Uh none of that changes. Uh at the working level, uh as opposed to at the leadership level and uh the nomenclature changing level, uh US officials still talk about uh opportunities and uh shared challenges in the in the waters of the Indo-Pacific. Uh but in the business of diplomacy, symbolism and names do matter, words do matter. And uh this has certainly been noticed in India uh with some concern, uh, but with some equanimity as well, because uh it's it's been it's been coming for the few months. It it wasn't the complete shock. Uh there was uh there were enough indications that something like this was coming. Uh having said that, uh for the past year or so, resident Indo-Pacific powers or nations, uh again, Australia, India, Japan, Philippines, Indonesia, the whole host of them, uh even Singapore, have been looking to do more with each other. You know, the Indo-Pacific strategy or even Quad as an idea. Quad was not so much, or is not so much. Sorry, I can't speak of it in the past tense. I shouldn't.

SPEAKER_01 29:57

Let's not put it in the past tense.

SPEAKER_00 29:59

Okay, no, it's not. Quad is not just an institution or a collective of four countries. It's also a set of principles. A set of principles that need to be evangelized by one or two or three quad countries with non-quad countries that are partner countries. And that process is continuing. So, you know, India, Australia, and uh, let's say Indonesia working closely together, or India, Korea, and and Japan talking technology, but did happen some some time ago and could uh move further apace. So all of that is still happening, and uh there is there is life after January 2029, hopefully.

SPEAKER_01 30:41

That that's all very well said. Um, and is it of course the case uh that the quad foreign ministers met recently? Um, we are still waiting for news of the possibility of a quad leader level summit. Um, in parting a shock, I'll note and welcome your thoughts on this. Uh, you know, President Trump mentioned somewhat obliquely that he planned to visit India sometime in the indefinite future. Um, but as you're saying, the nomenclature would matter less than real moves forward to accelerate some of these minilateral configurations, all of which see India as a crucially important player in the Indo-Pacific, um, and all of which operate on a shared of shared principles, shared values, and ultimately shared strategic objectives when it comes to the way that the region is governed. Um, as we get ready to part today, Ashok, I wonder what are your prospects for a President Trump visit to India? Uh, you know, shall we assume that this takes a trade deal to really uh be able to make happen? And is this something that you believe Prime Minister Modi will be prioritizing in the next c coming months?

SPEAKER_00 31:52

You know, uh the relationship has taken a lot of blows in the past year. We've taken it to a manageable floor right now with problems every once in a while. I mean, the killing of Indian uh seafarers uh uh by US troops has been a problem and uh is a problem in this country. Uh and uh you know Indian seafarers are found across the world just doing their job. They're not combatants, India didn't start this war, India's not part of this war. When they get killed, you can imagine the public reaction here, and when the response from the US is uh hey, stuff happens, uh it does it doesn't help. Uh given all of this, given that we've we reached some sort of a flaw with the hope of a trade deal, uh I would rather not risk a visit at this stage, because uh a visit will require very deft political management in India domestically. It will also require outcomes for which I don't think we are ready yet, either side is.

SPEAKER_01 33:04

It's a very well said parting thought, Ashok. Um, because of course, while we see US-India ties, as you say, in a stable place, maybe on a relative upswing. It is always the case that when you have a downturn in relations, that activates a wide range of constituencies that creates complicated politics. And in this case, the US and Indian sides will probably be dealing with those politics for quite a while to come. Ashok Malik, thank you so much for being back with us.

SPEAKER_00 33:35

Thank you so much, Mira. I enjoyed that.

SPEAKER_01 33:38

As I reflect on my conversation with Ashok, I am struck that my takeaway is very similar to the last time I spoke to him. And that is for all of the geopolitical complications that have been introduced into the US-India relationship over the course of the last 18 months. India under Prime Minister Modi is navigating this period remarkably deftly as it seeks to position itself for a new era of multi-alignment. Whether one looks at the deaf diplomacy that Prime Minister Modi and Foreign Minister Jaishankar have rolled out across Europe in an effort to secure warmer ties with all of those countries, or the slew of deals that the Indian government signed with the French government on the sidelines of the G7, India is clearly embracing this opportunity to secure a new position in European markets and European political relationships. This is all occurring alongside a now stable and slightly warmer set of ties with the United States, even as the Modi government waits to see how it can maximize its potential under a US-India trade deal. What comes next is produced by Rivon Duyastino and executive produced by Lauren Dewick. It contains music from Cody Martin via Soundstripe. What comes next is a production of the Asia Group and is powered by Tag AI, Tag's geopolitical decision engine for business. We'll see you on the next episode.