In this episode of Nothing But The Truth, Raj Chengappa presents the inside story of how Modi negotiated a brave new deal with Trump and analyses whether his high-risk gambit will pay off?
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00:00It was a high-risk gambit for Modi, given Trump's reputation of being mercurial and brutally frank, as we've seen,
00:08along with a penchant for making atrocious demands.
00:13But the Indian team had prepared well.
00:15Rather than purely focus on trade and tariffs,
00:20Prime Minister Modi wanted to use his summit meeting with Trump to dwell on a spectrum of forward-leaning issues
00:27that would set the agenda for the relationship for the next four years of his term,
00:32and not just for the next four weeks.
00:35So, even before the two leaders met formally,
00:38the Indian team hammered out an agreement with Trump's team
00:42on what we could discern as four major pillars on which the new deal would rest.
00:48Now, these were major commitments to enhance collaborations in trade, defence, energy and technology,
00:56and the initiative was interestingly given a catchy name.
01:00It was called the US-India Compact for the 21st Century.
01:07Nothing but the Truth.
01:08Hello, I'm Raj Chengapu of India Today, and your host for Nothing But the Truth.
01:13This is my weekly X-ray of key issues that concern you, without holding back on the truth.
01:19It has been barely a month since Donald Trump formally assumed office as the President of the United States,
01:26but he has already gone about in a major global demolition spree
01:32with astonishing speed, and for many, an alarming speed.
01:37Trump is rapidly dismantling massive parts of his own federal bureaucracy,
01:43and the idea of what constituted America.
01:47Trump has also walked his talk of throwing out illegal immigrants in the US,
01:51and forcing his pet peeve of forcing nations trading with America to lower their tariffs significantly,
01:58and working to bring an end to the big wars in Israel and Ukraine.
02:03Amongst all these cataclysmic changes, Indian Prime Minister Narendra Modi
02:09proactively engaged with Donald Trump in Washington DC on February 13th.
02:15So in this episode of Nothing But the Truth, we will present the inside story
02:20of how Prime Minister Modi negotiated a brave new deal with President Trump,
02:26and analyze whether Modi's high-risk gambit will pay off.
02:36So let's start from the beginning, and even before Modi set out to meet Trump,
02:40Foreign Minister S. Jaishankar and the Indian negotiators made every effort
02:45to ensure that the Prime Minister does not walk into what they called an ambush,
02:51and possibly return red-faced and empty-handed after he met Trump.
02:57So Jaishankar's visits to the US soon after Trump was re-elected,
03:01and at the swearing-in ceremony on January 20th, ensured that he had tested the waters,
03:08and got a good grasp of what Trump 2.0 was going to be all about.
03:13The Indian assessment was that Trump was more bold, confident, and assertive
03:20than he was in his first term.
03:23The conservative Republican Party had become his supplicants,
03:26turning it into, well, Trump's own party.
03:30It was also with his own set of friends, filters, and priorities
03:35through which Trump viewed his relations with countries,
03:39and dealt with them in a manner that was anything but conventional, as we've seen.
03:45So the Indian delegation was aware that Trump remained capricious,
03:50and could swing like a pendulum from one extreme to the other,
03:54forcing them to be nimble-footed in their dealings with him.
03:58So that was the setup.
03:59One of the things that became very clear in the way that Trump behaved in the first month
04:05is that it would now be every nation for itself.
04:09And that was evident in the way Trump dismissively treated some of America's closest allies,
04:16including insulting Canada by referring to it as the 51st state of the US,
04:21demanding Greenland from Denmark,
04:24and asserting that the Panama Canal would soon belong to the US.
04:29Meanwhile, as he had promised during his campaign, on the day he assumed office,
04:33Trump forced Israel and Hamas to agree to a ceasefire,
04:36and walk the tenuous path towards peace.
04:39On the Ukraine war, Trump stunned his NATO allies,
04:43which is the North Atlantic Treaty Organization allies,
04:46by bypassing them and directly engaging with Russia for an early settlement.
04:52Now, the Indian negotiators had watched all this,
04:55and the way Trump rode roughshod over even America's closest allies
05:00indicated to the Indian negotiators that the situation called for a high degree
05:05of what they termed as practical realism.
05:09That's a new word, practical realism,
05:12and that Prime Minister Modi decided that being proactive would be a better bet
05:18rather than wait for months to pass,
05:21and so he got his team to push for an early meeting with Trump.
05:26Now, remember that the PM had interacted with Trump very closely during his first term,
05:31and the two had built up an extremely good rapport.
05:35So, on the face of it, the overall optics looked good for Modi to go and meet Trump early.
05:41It was the first time that an Indian Prime Minister, in fact,
05:46had brought an audience with the U.S. President or met the U.S. President so soon after he was sworn in.
05:51Trump had, of course, given audience to only three other national leaders before he met Modi.
05:57That was the national leaders of Japan, Israel, and Jordan's king.
06:02So, it did signal the kind of priority that Trump had according to his relations with Modi in India,
06:10and that was a good sign.
06:12Now, from what we understand, Trump saw India as a country that was big enough to make a difference
06:18but not large enough to cause problems.
06:21That was the assessment of the American interlocutors,
06:24and Trump saw value in meeting Prime Minister Modi early,
06:29especially if he could strike a trade deal that would reduce the bilateral trade deficit
06:35between India and U.S. that had ballooned to $46 billion.
06:39Now, if you convert that into Indian rupees, that's close to rupees 4 lakh crore.
06:45And this was in India's favor, that they had this deficit working for them.
06:51The other priority for Trump was to get Modi to take back verified Indian illegal immigrants in the U.S.
06:57without too much fuss.
06:59Now, there are an estimated 7,25,000 of them, of which 18,000 have exhausted all legal options
07:07and are ready for deportation.
07:09So, it was a high-risk gambit for Modi, given Trump's reputation of being mercurial
07:16and brutally frank, as we've seen, along with a penchant for making atrocious demands.
07:22But the Indian team had prepared well, utilizing the two-month transition period
07:28between the time Biden and Trump administrations took over
07:34and laid the groundwork for a hopefully fruitful partnership.
07:40Given Trump's obsession with trade tariffs, the Modi government decided to partially address his demands.
07:48And this was used as a staging ground in terms of the meeting with Donald Trump.
07:54And in the 2025 union budget, many of the tariffs U.S. exports to India
08:01that Trump had wanted lowered in his first term were reduced.
08:05Of course, the Indian finance ministry, headed by Nirmala Sitharaman,
08:10mentioned that this was a broad-based tariff reduction, not necessarily directed towards the U.S.,
08:16but it was pretty clear where the message was meant to go.
08:19Now, these included duties on bourbon, whiskey, high-end motorcycles, medical devices,
08:24and agricultural products like alfalfa hay and dry fruits.
08:29The idea was to indicate to Trump that India was conscious of his concerns
08:34and was ready to partner with him and, as an expert put it to me,
08:39to make good of the drought situation.
08:42That softened up Trump, but didn't defer him from piling the pressure on India.
08:48Now, four days before the Modi-Trump summit,
08:52the U.S. deported 104 illegal Indian immigrants on a military aircraft
08:57and photos of them being handcuffed with chain legs created an uproar in Parliament
09:03and put the Modi government on the back foot.
09:07Then, just an hour before the meeting with Trump on February 13th,
09:12Trump announced that he was imposing what he called reciprocal tariffs
09:18on all nations that traded with the U.S.
09:21And in that press conference, and remember this is before he met Prime Minister Modi,
09:26he even referred to India as being right on top of the list of abusers in terms of trade
09:33and that India had the highest tariff rates.
09:37Now, Trump's drastic move of imposing reciprocal tariffs across the world is reverberating
09:45because he, experts say, has delivered a body blow to the WTO
09:52that, in the 30 years of its existence, had worked towards a fair, rule-based trading system,
09:59even allowing what they called special and differential treatment for developing countries like India
10:04to maintain higher tariffs if needed.
10:07Now, I spoke to Sachin Trivedi, who is the Director General Research and Information System
10:12for developing countries, and he's an expert on trade, and he said,
10:16the WTO is as good as dead, and we need to think or rethink our export strategy.
10:24The U.S. interlocutors, whom the Indians spoke to,
10:28brushed aside these provisions that the WTO had as unfair when the Indians talked to them
10:34and pointed out that, in 2022, the average Indian tariff rates on U.S. imports was 15.30%,
10:43while the average U.S. tariff for Indian imports was 3.83%.
10:48And so, across the board, the U.S. was at a disadvantage of almost 12% differential
10:54in terms of tariff, and that is why they were keen to equalize it and ensure a fair trade.
11:00That was the U.S. point of view.
11:02The Indian team, of course, was very familiar with such pressure tactics
11:06and had factored in its response.
11:08So, rather than purely focus on trade and tariffs,
11:14Prime Minister Modi wanted to use his summit meeting with Trump
11:17to dwell on a spectrum of forward-leaning issues
11:21that would set the agenda for the relationship for the next four years of his term
11:25and not just for the next four weeks.
11:29So, even before the two leaders met formally,
11:31the Indian team hammered out an agreement with Trump's team
11:35on what we could discern as four major pillars on which the new deal would rest.
11:42Now, these were major commitments to enhance collaborations in trade, defense, energy and technology.
11:49And the initiative was interestingly given a catchy name.
11:53It was called the U.S.-India Compact for the 21st Century
11:58and COMPACT being an acronym for Catalysing Opportunities for Military Partnership.
12:03Keep this in mind, it's going to come up later.
12:07Catalysing Opportunities for Military Partnership accelerated commerce and technology
12:12and, importantly, the two leaders reiterated that it would be a results-driven agenda
12:19with initial outcomes by the end of the year
12:22to demonstrate trust in each other and the mutual benefits that they could get.
12:27So, the COMPACT, as it is called, is the big new deal,
12:31the bold new deal that they had negotiated.
12:34And let me give you a few examples of this deal that has been done.
12:39Let's look at trade and tariffs.
12:41The Indian side wanted the Americans to define the template they were looking at when it came to trade.
12:46Now, was it a revenue template that Trump was interested in
12:50or one focusing on reducing the deficit?
12:53Now, the Indian side pointed out to the U.S. side
12:56that the imposition of reciprocal tariffs by Donald Trump
13:00need not reduce the deficit which India enjoys over the U.S.,
13:04though it may expand U.S. revenues
13:07because of the higher duties that U.S. is going to charge us with.
13:11So, what the Indians advocated was a template
13:14that focused on reducing the deficit while growing overall trade.
13:19So, Modi and Trump then agreed to set a bold new goal titled Mission 500,
13:26which is aimed at more than doubling the total bilateral trade
13:31between India and U.S. to $500 billion by 2030,
13:37and that is from the current $194 billion that we have at the moment.
13:44And to give India more bargaining space,
13:47the two teams agreed to work towards what is called
13:50the first tranche of a multi-sector bilateral trade agreement
13:54by the fall of 2025, which means essentially September-October 2025.
14:00Now, the Indian side had hoped that by committing to a time-bound trade agreement,
14:05Trump would make an exception for India when it came to reciprocal tariffs.
14:10Remember, Trump had announced that he would go ahead with reciprocal tariffs
14:14and these would come into effect all across the world,
14:18all nations trading with the U.S. on April 2nd.
14:22India's hopes were dashed when in an interview days after his meeting with Prime Minister Modi,
14:27Trump was clear that he would not make an exception for India.
14:32Now, there was calculations done by the State Bank of India's research unit
14:38to assess how serious would be the impact to the economy
14:44if the U.S. imposed a 20% flat tariff raise
14:48based on the reciprocity phenomenon that Trump had wanted.
14:53And the study concluded that India would lose 50 basis points to its GDP.
15:00That amounted to an annual loss of $19.4 billion,
15:05or 10% of India's total trade with the U.S.
15:10That would be the impact, but we need to see
15:13what is going to unfurl in the months ahead on this matter.
15:17So Indians then went into what they call plan B
15:21and apparently the Indian side is preparing to put the first tranche
15:26of the bilateral trade agreement on a fast track.
15:30Their confidence stems from the fact that during Trump's first term,
15:34the two sides were close to signing what they called an early harvest trade deal
15:39before the COVID outbreak stopped the entire effort.
15:42Now with Donald Trump back in the saddle,
15:45India hopes to pick up where they left off
15:47and clinch a partial deal before the reciprocal tariffs kick off.
15:52But let's be clear, it's going to be a tough ask
15:56and is likely to put the relationship under severe strain
15:59once the reciprocal tariff starts.
16:02The other priority for Trump was, as I mentioned earlier,
16:07to get Modi to take back verified Indian illegal immigrants in the U.S.
16:11without too much fuss.
16:13And as I mentioned, there were something like 18,000 of them
16:17already verified and are ready for deportation.
16:21Now, Prime Minister Modi agreed to take back all illegal immigrants
16:24who had been verified as Indian citizens.
16:27But in return, India pushed the U.S. to agree
16:31what is called a secure mobility framework.
16:36This is the jargon used to ensure or facilitate appropriate visas
16:41for the over 300,000 or 3 lakh students
16:44who contribute close to $8 billion to the U.S. economy annually
16:49and for almost close to half a million professionals
16:53who form the backbone of America's information technology industry.
16:57So on the legal immigration front,
16:59Prime Minister Modi pushed President Donald Trump
17:03to ensure that there was a secure framework
17:06while even as he agreed to take back
17:09all the verified illegal Indian immigrants.
17:12Now, they also turned what was a clear negative
17:16into a positive force by getting the U.S. to agree
17:21to jointly destroy the ecosystem that enables illegal immigration to happen.
17:26And all of us should be concerned by that.
17:29And these include drug runners and terrorist backers.
17:32And interestingly, this move brings into ambit
17:36Khalistani-separate organizations operating in the U.S.
17:40who are apparently also involved in not only illegal immigrants
17:46coming into the U.S. but also allegedly in terms of drugs
17:50and other terrorist activities.
17:53And so India has got America to jointly get into these groups
17:59and prevent any such activity, which for India, that was a win
18:04because that was something that India had expressed repeatedly concerns,
18:08repeatedly expressed it to the U.S. whenever they met them
18:11that this was a problem that had to be dealt with.
18:14So there is a negative. Of course, let's not forget
18:18that when so many thousands of people come back to India,
18:21on an average earlier there was about a thousand illegal immigrants
18:26being flown back to India.
18:28But you can imagine when 18,000 people are coming,
18:31the number of flights that would be coming in and out,
18:33Prime Minister Modi will have to and his government will have to be
18:36concerned about the numbers and the kind of damage
18:40that might do to India-U.S. relations.
18:42But of course, let's be very clear, no one supports illegal immigration.
18:46And it is time those various gangs that operate in India and the U.S.
18:50and elsewhere in the world, that needs to be stopped.
18:53Now, it is not that Prime Minister Modi had, you know, no bargaining chips.
18:59Now, one of the big bargaining chips that India had with Trump
19:05was for India to step up its purchase of U.S. crude oil and liquid natural gas.
19:11Now, Trump had hinted at that.
19:13And this was especially after Trump announced his catchily phrased policy
19:18of drill, baby, drill to boost oil production in America.
19:22Now, currently, the U.S. is India's sixth largest supplier of crude oil
19:27and petroleum products, with its share being around $10 billion
19:32of the total annual imports of India of $135 billion.
19:39So, in the joint statement that was released after the Modi-Trump summit,
19:44India has agreed to establish the United States as a leading supplier
19:48of crude oil and liquid natural gas for its requirements.
19:53Just to give you a little bit of background,
19:55I had mentioned that the U.S. was sixth on the list of oil supplies to us,
20:00and on the top two, India currently purchases from Saudi Arabia and Iraq,
20:07apart from Russia, which is the third big country that we're doing.
20:11So, the U.S. hopes to move up the ladder in terms of purchases
20:15and hopes that India would more than double its current purchases
20:18to around $20 billion.
20:21But there is an unstated caveat in that agreement,
20:24and India has made it clear that this is subject to competitive pricing
20:29and logistic. It doesn't mean that they will blindly import U.S. oil
20:33just to make up for the trade deficit.
20:36They will insist that U.S. sell oil at a competitive price
20:40and ensure that the logistics and everything else is good for India.
20:45Now, the other thing that India did, and this was because they were aware
20:49that Trump's approach to international relations is transactional
20:52and puts America's business interests foremost,
20:55India had another carrot to offer, and that was greater purchases
21:00of America's top-of-the-line defense equipment.
21:03Now, just to give you a bit of background, since 2008,
21:06India has purchased close to $20 billion worth of military platforms
21:10that include heavy-lifter military aircraft, maritime surveillance aircraft,
21:15attack helicopters, missiles, and even state-of-the-art drones.
21:20Now, in his meeting with Modi, Trump offered co-production arrangements
21:24for America's Javelin anti-tank guided missiles and Stryker
21:29infantry combat vehicles, both top-of-the-line.
21:32And at the press conference, Trump announced that he was willing
21:36to look at selling America's top-of-the-line F-35 stealth fighter.
21:42This was a big thing that happened over there, and the fact that India
21:47has the ability to purchase a lot of the American equipment
21:51will make the relations more positive in terms of it,
21:55and hopefully dampen Trump's enthusiasm to impose or equalize tariffs with India
22:02as well as go slow on the other issues of concern for India,
22:06including immigration issues, illegal immigrations, and flying them back over here,
22:11all the Indians that have been identified.
22:14Now, for New Delhi, the other big gain was the deepening U.S. commitment
22:18on building India's capability on the AI front,
22:22and this was done with the launch of what is called U.S.-India Trust.
22:27They just love these acronyms, and the trust is expanded to say
22:31transforming the relationship, utilizing strategic technology,
22:35and this is an initiative called Trust, as I said, and central to it
22:40is the commitment to work with the U.S. and Indian private industry
22:44on a roadmap for accelerating artificial intelligence or AI infrastructure
22:49by the year-end, and this is done by identifying constraints such as finance,
22:53buildings, powering, and connecting large-scale U.S.-origin AI infrastructure in India
22:58with, they made it very clear, milestones and future actions.
23:03So this is another plus for India, and given the fact that India is very, very keen
23:10on acquiring critical and strategic technology,
23:15this friendship and this compact that India has engaged with the U.S.
23:22would enable that. So despite the fact that there were so many negatives
23:27that came up in terms of trade, in terms of illegal immigration,
23:31India in this sought to rectify a lot of this by turning it into a win-win
23:37rather than a one-way traffic for Trump. They seem to have succeeded in doing that,
23:41and another example of that was somewhat very important in terms of our policy
23:48towards putting down terrorism in the subcontinent and across the world,
23:53and this happened when the U.S. Supreme Court cleared the extradition of Tawahur Hussain Rana,
24:00a Pakistan-origin businessman and physician who was arrested in Chicago in 2009
24:05for his role in abetting the horrific 26-11 Mumbai attacks, you remember them,
24:11and India had waged a really long battle for Rana's extradition.
24:16Now in a summit with Modi, Trump promised to have Rana extradited to India at the earliest.
24:23Now importantly, there was mention of Pakistan's role, and Pakistan gnashed its teeth
24:30when the two leaders went on to reaffirm their commitment to eliminate the global scourge of terrorism,
24:36even telling Islamabad to stop fostering terrorist activities on its soil.
24:42So that was a win for India too. Now overall, if you look at it,
24:47and I'd spoken to Arun Singh, a former Indian ambassador, and he put it this way,
24:51the U.S. signal is that yes, there are differences with India, but we will be happy to work with it
24:57and do more things with it, including new ones.
25:02Now of course, as I'd mentioned, this has been a trade-off of sorts.
25:07It was a gambit, a gamble, whatever you'd like to call it, but there were negatives
25:12when Prime Minister Modi went to meet Trump in terms of both trade as well as in terms of illegal immigrants,
25:19and the fact that he wanted to fashion the entire relationship in the beginning purely on the basis of that.
25:25Instead, Prime Minister Modi ensured that President Trump went in for a broad-based agreement
25:31that looked at all sectors, including energy, which I'd mentioned.
25:35There's also mention of nuclear reactors that American companies can build here on the energy front,
25:42apart from buying oil from them. Then, as I'd mentioned, on trade,
25:46there is a big bilateral agreement that is there to happen later this year,
25:51plus the doubling of trade, the commitment to double the trade.
25:55Then on critical technology, especially on AI, there's an agreement on that.
26:01So there is a whole host, and of course, as I'd mentioned, in defense, getting state-of-the-art equipment.
26:07It's a very well-rounded agreement. A lot depends, of course, on the days ahead,
26:12and let's not forget President Trump is extremely mercurial in his behavior,
26:17and we've seen it could swing from one pendulum to the other.
26:20Hopefully, he will keep in mind that India is among his good friends, as he calls it,
26:26and will ensure that whatever was agreed upon in the Modi-Trump deal that was struck on February 13th
26:34would be observed from their side.
26:36One more point that is there, and we need to look at that,
26:40is that given that Donald Trump has moved to disrupt the entire emerging global economic order
26:50by firstly making the entire tariff system reciprocal rather than following the MFM and the WTO principles
27:00and therefore destroying it, many experts see this as India's 1999 moment to revamp our trade policies
27:09and make domestic industry more globally competitive.
27:14Now, I'd spoken to an expert, and he pointed out what Trump has done, and I'm quoting him,
27:21is that it's a good wake-up call for us and a really fantastic opportunity to liberalize our trade policy.
27:29Now, he says that reciprocal tariffs hit everybody, but it strikes competitive economies
27:35more than complementary ones to the U.S., and India is on the complementary side,
27:41and with other countries, including China, likely to be more severely impacted,
27:46it is time for India to occupy the space in the global supply chains that these countries would vacate.
27:53To do that, experts say India needs to go back to the drawing board, reassess all the 11,000 tariff lines it has,
28:01and vacate space being blocked by a protectionist-minded industry
28:06that continues to look for nanny treatment from the government.
28:10Also needed is a revamp of the country's export negotiations and negotiators and the entire setup,
28:17including adding more experienced staff to quickly strike beneficial bilateral and multilateral trade deals.
28:25Now, I would like to end with what Prime Minister Modi told President Trump in that famous press conference,
28:32and he said, speaking to Trump, he said, you have MAGA, or Make America Great Again,
28:39and I have vixit Bharat by 2047, which is to make India great again.
28:45So MAGA, the acronym for Make America Great Again, and MIGA for Make India Great Again,
28:52and he said MAGA plus MIGA equals Mega Partnership for Prosperity.
28:57So it is in India's interest to maximize the potential of this brave new deal with Trump and minimize the damage.
29:08For more details, you could read my cover story on the Modi-Trump deal in the latest issue of India Today.
29:14Thank you for being with me in this episode of Nothing But The Truth.
29:17I look forward to having you with me next week.
29:23Nothing But The Truth.