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Irritants that soured India-US ties — H-1B visa cap, Russian missiles & high tariffs

US Secretary of State Mike Pompeo’s 3-day visit to New Delhi, starting Tuesday, may give India and US a chance to sort out some of the irritants in their ties.

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New Delhi: The US policy towards India since the early 2000s has been driven by the hope that in future, a rapidly growing India is the only possible counterweight to China in Asia.

But, over the past few years, India’s slow economic growth and inability to modernise rapidly, has irked America. Besides, US President Donald Trump and his transactional outlook towards foreign policy have soured the India-US relationship. Therefore, disputes related to trade and investments were increasingly contested in public and not resolved at diplomatic levels.

As US Secretary of State Mike Pompeo comes to New Delhi for a three-day visit from Tuesday and Prime Minister Narendra Modi is set to meet Trump on the sidelines of the G20 Summit in Japan later this month, ThePrint looks at the major irritants in the India-US relationship.

Mini trade war

Over the past year, the most prominent irritant in India-US ties has been the trade war. Last year, America had hiked tariffs on steel and aluminum imports, including from India. New Delhi then decided to retaliate by increasing tariffs on 22 American exports, but did not immediately implement the hike.

On June 5, America withdrew special trade privileges granted to India under the Generalised System of Preferences (GSP). Under this scheme, the US grants some Indian exports, such as textiles and engineering goods, preferential or duty-free access to the American markets. The removal of these privileges would affect $5.6 billion Indian exports. In retaliation, India went on to hike tariffs on 28 American goods, including apples, walnut, iron and steel products.

Also read: On trade tariff, India & US need to place strategy over economy keeping domestic politics out

India’s high trade barriers

In addition to the emerging trade war, the office of the US Trade Representative (USTR) said that India continues to implement extremely high tariffs on flowers, natural rubber, automobiles, motorbikes and other goods.

The US is especially miffed at India’s action in early 2018 when, in the annual budget, the government had hiked import duties and adopted price caps on a range of imports such as medical devices and ethanol.

The US government also complained about India’s complex customs clearance procedures, which they said, caused delays, increased costs and added to uncertainty.

US cap on H-1B visas 

After Trump came to power, the US government has tried to restrict foreign immigrants. As a consequence, there have been attempts by the Trump administration to curtail the number of H-1B visas issued every year.

The Indian government has strongly objected to this move, arguing that the restrictions on work visas would inhibit Indian workers to move to the US.

The H-1B visa, popular among Indian IT professionals, is a non-immigrant visa that allows US companies to employ foreign workers in special occupations that require theoretical or technical expertise.

E-commerce policy and data localisation

The US has criticised India’s data localisation and the draft e-commerce policy, calling it “most discriminatory and trade-distortive”.

The USTR 2019 National Trade Estimate Report on Foreign Trade Barriers noted, “India has recently promulgated a number of data localisation requirements that would serve as significant barriers to digital trade between the US and India.”

The US government said India’s data localisation requirements, as mandated by Reserve Bank of India’s rules and the proposed e-commerce Bill, severely hiked the costs for American companies operating in India.

The report further noted that India has inadequate infrastructure to protect data from “unfair commercial use as well as unauthorised disclosure of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural products”.

India’s dependence on Russian defence equipment

In 2017, the US Congress had passed the Countering America’s Adversaries Through Sanctions Act (CAATSA). According to this Act, sanctions could be imposed on any country indulging in procurement of weapons from a foreign so-called “rogue” government. This legislation was introduced to predominantly target Iran and Russia.

India’s decision to buy four S-400 Triumf long-range missiles from Russia, worth $5.4 billion, has emerged as a major cause of irritation in India-US relations. The Trump administration had asked India to reverse its decision and seek other alternatives to the S-400 missiles, otherwise it said it would be forced to implement sanctions on India.

While the procurement of the missiles has irked the Americans, the underlying issue seems to be India’s dependence on Russian defence equipment. Over the past couple of years, India has signed three more defence deals with Russia. These four deals, including the procurement of S-400 missiles, are worth over $12 billion.

Also read: Modi should strengthen ties with the US but not allow Trump to bully India

Ending Iranian oil waivers for India

India has had to pay the cost of escalating US-Iran tensions. After withdrawing from the 2015 Iran nuclear deal last year, the US had imposed strict economic sanctions on Iran and restricted its ability to export oil.

In April, the US ended waivers that allowed India to buy oil from Iran. India has been demanding that the American government allow it to continue its imports from Iran, but Washington has remained firm on its position. According to sources, India is expected to once again try to convince the US to let it resume buying oil from Iran.

Apart from these issues, India’s reluctance to ban Chinese firm Huawei to participate in the upcoming 5G trials and US’ decision to exit from Afghanistan also have the potential to cause damage to the India-US relationship.

Poor enforcement of IPR

According to a recent report released by the USTR, India continues to feature on the ‘Priority Watch List’ for alleged Intellectual Property Rights (IPR) violations.

“India remains one of the world’s most challenging major economies with respect to protection and enforcement of IP,” said the report.

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  1. To be perfectly honest, India and the United States are not a marriage made in heaven. All of Asia – barring Pakistan and North Korea – is troubled by the rise of China. That shared concern is not cement enough to create the defining partnership of the 21st century and all the high sounding phrases that are uttered at the time of each summit. The whole world has profited from access to the US market. For India, it has sustained our IT industry, made it a global success story. However, India has missed the bus that a succession of Asian economies, starting with Japan and going all the way up to China, forty years later, have ridden to export led prosperity. Still a good, possibly even the best, friend. However, a complex relationship that is under considerable strain now.

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