India - US COMPACT Initiative | 21 Feb 2025

Source: IE 

Why in News?

The US-India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century was launched by President Donald Trump and Prime Minister Narendra Modi. 

What are the Highlights of the India - US COMPACT Initiative? 

• Defence Collaboration:  A new 10-year Framework for the US - India Major Defence Partnership (2025-2035) will be signed, expanding Defence sales and co-production of Javelin Anti-Tank Guided Missiles, and enhancing joint exercises like Tiger Triumph. 
  • The initiative includes the Reciprocal Defence Procurement (RDP) Agreement for seamless Defence trade and Autonomous Systems Industry Alliance (ASIA) to boost AI-driven autonomous Defence cooperation. 
• Trade and Investment Expansion: Under the COMPACT Initiative, the 'Mission 500' initiative was launched to increase bilateral trade to USD 500 billion by 2030, supported by negotiations for a Bilateral Trade Agreement (BTA). 
  • Efforts include reducing trade barriers, such as tariff cuts on beverages, vehicles, and Information and communication technology (ICT) products, while increasing market access for agricultural goods and industrial exports. 
• Energy Security: Strengthens energy ties, boosting oil, gas, and nuclear cooperation, with the US supporting India's International Energy Agency (IEA) membership. 
• Technology Advancement:  The Initiative on Critical and Emerging Technologies (iCET) was rebranded as TRUST (Transforming the Relationship Utilizing Strategic Technology), focusing on semiconductors, quantum computing, and Artificial Intelligence (AI). 
  • Efforts will expand critical mineral supply chains, including lithium and rare earth recovery projects.  
  • Civil space cooperation will advance through NASA-ISRO initiatives, including an Indian astronaut's mission to the International Space Station (ISS) and the NISAR launch. 
• Multilateral and Regional Cooperation: Strengthen Quad partnerships, enhance counterterrorism efforts, Indo-Pacific security and advance connectivity projects like the India-Middle East-Europe Corridor. 
• People-to-People Engagement: The COMPACT initiative boosts academic and workforce mobility, eases legal migration, and strengthens law enforcement cooperation against trafficking and transnational crime. 

What are the Key Challenges in India-US Relations? 

• Tariff Disputes: President Trump criticized India's "onerous tariffs" (burdensome and excessively high import duties) and reinforced his policy of "reciprocal tariffs" (tariffs imposed in response to similar tariffs by another country), which could increase costs for Indian exporters. Further, the absence of a Free Trade Agreement increases tariffs, and restricts trade. 
  • India’s current trade surplus with the US may shrink as it increases imports to reach the USD 500 billion trade target, potentially requiring selective tariff reductions that favor US interests over broader India’s economic efficiency. 
• Immigration Policies: India agreed to facilitate the return of 2,20,000–7,00,000 undocumented Indians immigrants, a move seen as aligning with Trump’s stricter immigration stance. 
  • Despite India's reliance on H-1B visas for IT professionals, no clear commitments were made, reflecting ongoing tensions between Silicon Valley and Trump’s nationalist policies. 
• Technology Transfer: Despite growing Defence ties, US restrictions on AI, drones, and missile technology hinder India's access to advanced Defence systems. 
• Data Localization: The US opposes India’s data sovereignty laws, arguing they hurt American tech firms, while India insists on national security and user privacy protections. 
• Geopolitical and Multilateral Differences: Despite US support for India's permanent UNSC membership, differences in global governance persist, with the US urging India to leverage its ties with Russia to end the war, while India maintains neutrality. 
  • India's historical Defence and energy ties with Russia conflict with US efforts to isolate Moscow. 

Way Forward 

• BTA: Finalize the BTA to ease trade tensions, improve supply chain integration in semiconductors and pharmaceuticals, and harmonize regulatory standards with US norms to attract investments. 
• Workforce Mobility: India should push for higher H-1B quotas, and faster visa processing to support professionals and tech talent and mutual recognition of qualifications is essential to enhance workforce integration. 
• Data Governance: India should selectively ease data localization norms, facilitate US tech investments in India, and develop joint cybersecurity frameworks to enhance trust in digital governance. 
• Diplomatic Engagement: Strengthening US-India engagement in multilateral forums like Quad, IPEF while leveraging India’s strategic role in the Global South to address global governance differences and enhance economic and security influence.