high-ranking US officials frequently claimed that a caravan of American companies would relocate from China to India. However, this shift never substantially materialized, and US investment in India remains minimal. Instead, India’s trade dependence on China has increased significantly.
In his second term in 2019, Modi appointed S Jaishankar as foreign minister, hoping that his pro-American stance would help attract US investment and technology, while also securing preferential access for Indian goods in American markets—similar to what China achieved in the 1990s.
However, the role of the US government in its economy is largely limited to creating a legal framework for international trade and investment through treaties and regulations. The task of fostering a conducive investment environment falls to the host country, which American investors have long felt is lacking in India. Instead of increased US investment, major American companies like Ford, General Motors and Harley-Davidson exited the Indian market during this period.
Recently, it was hoped that assembling Apple’s iPhones in India would be a successful venture. However, the initiative faced significant setbacks due to high rejection rate of 50%, and concerns over E coli bacteria contamination, and lower worker productivity compared to China. As a result, the economic benefits India expected from aligning with the US and becoming its partner have not materialized as anticipated.
On the geopolitical front, meanwhile, India lost significantly. It once viewed South Asia and the Indian Ocean as its traditional sphere of influence, but after becoming a US ally, none of its neighboring countries remain within its sphere. Instead, India has arguably become more of a subordinate ally to the US.
This made India realize that the US expects it to relinquish its “strategic autonomy” and that India’s claims to a regional sphere of influence in South Asia are unacceptable to Washington.
Henry Kissinger famously remarked, “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.” This sentiment seems to fit India’s experience perfectly. The US continued to exert political pressure on India at international events.
Meanwhile, despite India’s rhetorical trade restrictions on Chinese goods, its trade with China continued to grow. India’s increased trade with the US was largely driven by its rising imports from China. This dynamic revealed that while India needs China for its economic growth, China does not have the same dependence on India.
Ultimately, after four years of experimenting with foreign policy, the Modi government came to understand that China’s cooperation is essential for India’s economic development. The prime minister’s economic adviser argued that China would likely refrain from interfering in India’s border issues due to its dependence on India, coupled with the prospect of increased Chinese investment.
On the other hand, following the Ukraine war, the West intensified pressure on India to oppose Russia. The US warned India of consequences if it continued to purchase Russian oil and insisted that India abandon its relations with Russia, promising in return to provide arms.
Despite this pressure, India has continued to buy cheap Russian oil and is currently Russia’s largest oil buyer. Russia accounts for approximately 36% of India’s arms imports. The US pressure on India to refrain from purchasing arms and oil from Russia runs counter to India’s national interests.
Modi’s allies now recognize that maintaining a relationship with China is crucial for India’s economic development. Should China impose trade restrictions on India, the country would face significant challenges. The US can no longer offer the same advantages to India that it provided to China in the 1990s.
Modi has come to understand that India cannot secure preferential market access, technology or investment from the US due to its protectionist industrial and international trade policies, which favor bringing manufacturing back to America. Consequently, he has also acknowledged that India can seek technology, investment and market opportunities from China.
Conversely, Modi’s policy aimed at becoming a steadfast ally and partner of the US, which was intended to serve India’s interests, has proven to be fundamentally misguided. The ongoing border tensions with China have diverted India’s national priorities and squandered scarce financial resources. Modi has come to understand the truth in Kissinger’s words about the dangers of being America’s friend.
The first and second terms of Modi’s government have marked one of the worst decades in India’s history in regard to international relations. During this period, India has incurred unprecedented opportunity costs while experimenting with international and geopolitical strategies. In his third term, Modi is looking to reverse the course by shifting from the US to China.
