Trump Administration Views India as Resource Rival, Warns Chief Economic Adviser

Trump’s America Sees India as Both Partner and Competitor, Says CEA

NEW DELHI: India’s economic ambitions over the next two decades could face growing challenges from geopolitical rivalries and an intensifying global struggle for resources, Chief Economic Adviser V Anantha Nageswaran has warned, pointing to a more complicated American approach towards New Delhi under US President Donald Trump’s second administration.

Speaking at the Delhi Macroeconomics Workshop at the Indian Statistical Institute, Delhi, on Thursday, Nageswaran said Washington’s attitude towards India had been less welcoming than many had anticipated.

He argued that the United States increasingly sees India through two lenses — as a strategic partner in certain areas and as a competitor for resources, investment and industrial capacity in others.

The senior economist said expectations that Trump’s second term would broadly follow the approach adopted during his first presidency had not been borne out.

He suggested India’s growing economic and manufacturing ambitions were among the factors reshaping Washington’s calculations.

As developed economies seek to bring manufacturing activities back within their borders, the demand for essential raw materials and industrial resources is intensifying.

India, with its own expanding industrial requirements, is increasingly competing for the same supplies, creating potential friction even between countries that cooperate strategically.

Strategic partnerships no longer guarantee economic alignment

Nageswaran cautioned against assuming that India’s participation in arrangements such as the Quad, or its shared concerns about China, would automatically translate into full alignment with American interests.

He said countries could find themselves cooperating on certain strategic issues while competing fiercely in other areas.

Such overlapping interests, he warned, would make the international environment increasingly difficult to navigate and could interfere with India’s long-term economic priorities.

Referring to US Secretary of State Marco Rubio’s recent visits to Jamnagar and Mumbai rather than New Delhi, Nageswaran suggested that diplomatic engagements must also be viewed in the context of Washington’s broader assessment of India’s strategic and economic positioning.

He emphasised that a country’s importance in the emerging global order would increasingly depend on the resources and industrial capabilities it could offer.

India’s petroleum-refining capacity, for instance, could provide the country with significant leverage in international negotiations.

The CEA also linked the wider geopolitical contest to American interest in Greenland and Venezuela, as well as proposals concerning Canada’s possible status as a US state.

These developments, he argued, should be understood partly through the growing importance of access to tangible resources rather than through traditional diplomatic considerations alone.

Trade deal negotiations continue despite bilateral tensions

Nageswaran’s remarks come as India and the United States continue discussions on a proposed bilateral trade agreement.

Despite recurring tensions, both governments have indicated that negotiations have advanced considerably.

The CEA himself expressed optimism about the prospects for a deal, suggesting that the outstanding issues appeared limited and that the agreement was close to completion.

However, trade negotiations have unfolded against a backdrop of strained relations.

Among the major points of friction has been Washington’s decision to impose an additional 25 per cent tariff on Indian goods in 2025 over India’s purchases of Russian arms and energy products.

The episode underscored how disagreements over foreign policy and energy security can spill over into commercial relations, complicating efforts to strengthen economic cooperation between the two countries.

Global economy faces a more volatile era

Looking beyond the bilateral relationship, Nageswaran warned that some of the most damaging economic disruptions in the coming years could arise from deliberate policy decisions rather than unforeseen events.

He described the emerging international environment as increasingly volatile, with countries competing for strategically important resources, including rare-earth elements and semiconductors.

In such circumstances, businesses and governments may no longer be able to rely on uninterrupted trade, peaceful international relations or consistently available supplies.

His warning reflects a broader shift in economic policy, as governments increasingly prioritise national security, domestic production and reliable access to critical materials over the assumption that global markets will always provide sufficient supplies at competitive prices.

India faces competition for foreign investment

The competition is extending beyond raw materials and manufacturing to the availability of investment capital, Nageswaran said.

He pointed to efforts by advanced economies to attract large investment commitments as they seek to rebuild domestic industrial capacity.

Canada, he noted, held an investment summit in September with a target of attracting $1 trillion, while Germany was expected to organise a similar initiative the following month.

Such efforts challenge the conventional assumption that emerging economies primarily compete with one another for foreign direct investment.

Increasingly, India must also contend with developed countries that traditionally supplied international capital but are now aggressively seeking funds for their own economic transformation.

For India, the challenge is therefore not simply to attract investment but also to remain competitive in a global market where governments across different income groups are pursuing similar industrial and financial objectives.

Gross FDI rises, but net inflows remain a concern

India continues to attract substantial foreign investment in absolute terms, but the gap between gross and net foreign direct investment has become an important indicator of changing capital flows.

According to the figures cited in the report, gross FDI during the first five months of the 2026-27 financial year reached $54.93 billion, marking a 21 per cent increase over the corresponding period a year earlier. Net FDI stood at $13.79 billion, up 43 per cent year-on-year.

The improvement follows a difficult period in which net FDI fell to $6.71 billion in 2025-26, after dropping below $1 billion in 2024-25.

The divergence between gross and net investment reflects the impact of Indian companies investing overseas and foreign investors repatriating funds from earlier investments.

Consequently, strong headline inflows do not necessarily translate into an equally large increase in the net capital entering the country.

Trade agreements offer fresh opportunities for Indian industry

Despite these risks, Nageswaran expressed confidence in India’s economic prospects. He said the benefits of several trade agreements already concluded or awaiting implementation had yet to be fully realised.

These arrangements could create fresh opportunities for Indian exporters, particularly in labour-intensive manufacturing and services.

Their contribution, however, would depend on India’s ability to expand production, improve competitiveness and ensure that domestic industries can respond to the additional market access.

He stressed that trade agreements alone would not be sufficient to secure sustained industrial growth. India must also prepare for disruptions in the availability of essential inputs that could interrupt production and raise costs.

CEA calls for strategic reserves beyond crude oil

Nageswaran urged policymakers to develop stronger safeguards against shortages of critical industrial materials.

While crude oil receives considerable attention in India’s energy-security planning, he argued that similar preparations were needed for other inputs essential to manufacturing.

He specifically identified industrial metals, fertilisers and active pharmaceutical ingredients (APIs) as areas where the country should consider building adequate buffers and establishing clear mechanisms for releasing supplies when shortages occur.

Such reserves could help protect factories and supply chains from sudden international disruptions, allowing businesses to maintain production even when global markets become unstable.

The CEA’s central message was that India’s long-term manufacturing ambitions will depend not only on trade agreements, foreign investment, and diplomatic partnerships, but also on its ability to secure the materials required to keep its industries operating.

As competition for resources intensifies and economic policy becomes more closely tied to national security, building resilience into India’s supply chains will be essential to sustaining growth over the next 20 years.