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Dec 18, 2024 07:55 IST
First published on: Dec 18, 2024 at 07:55 IST
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With the Trump presidency around the corner, there is much speculation about its impact on an already uncertain international situation. One may see a reduced proclivity to dabble in India’s internal affairs, especially with respect to so-called human rights and democratic freedoms. Defence cooperation, on the other hand, is likely to deepen.
Although the Biden administration had dispatched the multirole F-35A Joint Strike Fighter to participate at the Aero India 2023 show and had offered the MIM-104 Patriot surface-to-air (SAM) missile system and the Terminal High Altitude Area Defence (THAAD) advanced anti-ballistic missile defence system, India’s acquisition of the Russian S-400 reportedly created technical and strategic challenges in integration, apart from US concerns about data exposure to Russia. Since 2016, when the US upgraded India to a “Major Defence Partner” and granted it Strategic Trade Authorisation-1 (STA Tier-1) status, Indian companies have become an integral — although this is still at a nascent stage — part of the value chain for US aircraft manufacturers. Major US Original Equipment Manufacturers (OEMs) such as Lockheed Martin and Boeing are already collaborating with Indian companies. Under Trump, the US is unlikely to take any steps that undermine the supply chains and operating margins of US’ defence conglomerates anchored in India.
At the same time, many OEMs view India’s scale of procurement as sub-optimal. This may explain their reluctance to invest in Indian manufacturing facilities. However, in instances where manufacturing in India is made an integral part of the acquisition criteria, US companies can be expected to fall in line alongside other vendors. For example, Lockheed Martin appears willing to manufacture the F-21 in India as the Request For Proposal (RFP) for the Multi-Role Fighter Aircraft (MRFA) is likely to mandate such a requirement. Sig Sauer has announced its interest in setting up a 100 per cent owned manufacturing entity for making assault rifles in India because, in this case, the scale of procurement is considerable. US OEMs seem to prefer wholly owned subsidiaries in India to avoid profit-sharing or transfer of technology (ToT) to joint venture partners.
Yet overall, the Trump administration is likely to be less inhibited about high-tech sales to India, given its geopolitical contestation with China. India would have to weigh its choices carefully, between spending a limited budget on costly US platforms versus atmanirbharta in defence manufacturing.
Stricter H-1B visa rules could impact the operating margins of Indian IT firms but the focus of the new US administration is likely to be on illegal immigrants. With Republicans controlling the political firmament, stability in decision-making, a stronger dollar and possible cuts in corporate tax rates may, in fact, benefit Indian companies.
Indians make up the third largest group of illegal immigrants in the US. Over 90,000 Indians are reported to have illegally entered the US in 2022-2023. India might have to countenance the return of a large number of deportees. If it prompts stringent action against human trafficking, that would be the silver lining. India should also prepare to deal with possible demands by Trump’s evangelist constituency for relaxations in India’s visa policy.
Past records point to the likelihood of higher customs duties on India’s export of automobiles, textiles and pharmaceuticals, as part of an America First agenda. After all, it was a Trump administration that increased import duties on steel and aluminium and withdrew GSP trade preferences for India. At the same time, a tough posture on trade issues with China could create new opportunities for Indian exporters. Renewed emphasis on “friend-shoring” of supply chains could lead to a manufacturing spurt in India.
Climate action goals may receive a setback with the expected reorientation towards fossil fuels. There could be fresh US demands on India to increase imports of US oil and gas.
Private players like Elon Musk, a strong Trump supporter, as well as Peter Thiel who played a key role in the selection of J D Vance as Vice-presidential nominee, are entrepreneurs who will leverage high-end technologies to promote their business interests in the defence and national security sector, through Starlink/SpaceX and Palantir. Musk’s push for lower entry barriers for satellite broadband services and Tesla electric vehicles in India may receive a shot in the arm. If Trump rolls back strict emission standards in the US market and fulfils his “anti-EV” promise, attention could quickly shift to securing other markets for Tesla, including in India’s growing automobile sector.
AI policy in the US is also likely to be driven by prominent Trump supporters, including Elon Musk and Marc Andreessen. As a fallout of the geopolitical contestation with China, the Trump administration may create more firewalls around AI innovation in the US. This could still lead to some opportunities for India to secure open access to AI innovation in US labs and provide greater scope for Indian start-ups to build AI applications using US open-source models. India’s large talent pool is attractive for the US.
Civil aviation is one of the fastest-growing sectors in India, with estimates of more than 500 million domestic and international air travellers by 2030. It is important for India to engage the Trump administration in developing infrastructure for design, development, production and servicing of passenger aircraft. India should also seek deeper engagement with the US in space technologies, building on the Axiom Mission 4 initiative which will deliver an Indian astronaut to the International Space Station in 2025. There is a case for closer collaboration on earth observation satellites such as NISAR as well as India’s planned mission to Venus, the manned Moon mission and the development of an Indian space station.
Speculation notwithstanding, the return of President Trump to power heralds fresh possibilities for India’s strategic partnership with the US.
The writer is the director general of the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi.
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2024-12-18 02:25:42
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