Hello, this is Spriha Srivastava, CNBC International’s Executive Editor for Digital, writing from London. This week, I take a closer look at India’s tightrope walk — tariffs from Washington, oil from Moscow, and an uneasy handshake with Beijing. Let’s dive in.
Russian President Vladimir Putin, Indian Prime Minister Narendra Modi and Chinese President Xi Jinping meet on the sidelines of the 2019 G-20 summit in Osaka, Japan.
Mikhail Klimentyev | Afp | Getty Images
This report is from this week’s CNBC’s “Inside India” newsletter. Like what you see? You can subscribe here.
The big story
Picture this: you’re at a dinner party with three friends who are struggling to get along. One is picking fights with everyone, another is slipping you secret notes under the table, and the third is that old frenemy you’d rather avoid but can’t ignore. Awkward, right?
That is where India finds itself. Washington is piling on tariffs, Moscow is keeping India’s energy bills in check with cheap oil, and Beijing, despite a bruised relationship, is preparing to welcome Prime Minister Narendra Modi with open arms at the SCO summit in China this week. India’s juggling act on the world stage has never looked more complicated, or more consequential.
Trade with the U.S. has become a flashpoint. Washington has imposed a 25% reciprocal tariff on imports from India, followed by another 25% penalty tied to India’s Russian oil purchases. That leaves duties on some Indian exports as high as 50%. The U.S. is India’s single largest export market, worth about $87 billion a year, nearly a fifth of its total merchandise trade. Key Indian sectors such as diamonds, garments and seafood are especially exposed.
Think of what that means on the ground. Diamond polishers in Gujarat, garment workers in Tirupur, and seafood processors in Kerala all depend on U.S. orders. Electronics and pharma are spared for now, but other sectors — which employ millions — are suddenly exposed.
The tariff fight comes even as the two countries deepen strategic ties. On a number of fronts, the U.S. and India are cooperating; the two countries are expanding defense cooperation, for instance, working together in the Quad, and advancing semiconductor supply chain talks.
Major U.S. firms, including Apple, Microsoft, and Amazon, have increased their investments in India in recent years. Yet trade frictions complicate the relationship, raising the question in Delhi: does Washington view India as a true partner, or simply another trading problem to manage?
Now, let’s turn to Russia. India is the world’s third-largest oil consumer, burning through more than 5 million barrels a day, so cheap energy isn’t a luxury — it’s a necessity. In 2021, just 1% of India’s crude came from Russia. Today it’s more than 35%, around 1.75 million barrels a day, saving Delhi over $17 billion since early 2022, according to analyst estimates. Those discounts have kept inflation in check and given Modi breathing space at home.
But there’s a second layer here. India is walking a geopolitical tightrope, with Pakistan tensions threatening to boil over. In that context, Russia is a vital security partner and central to India’s defense procurement, making it difficult for Delhi to pull away without weakening its security posture.
The catch? Washington isn’t impressed. U.S. officials including Peter Navarro and Scott Bessent argue Delhi is “profiteering” by paying above the G7’s $60 price cap on Russian oil and exporting refined fuels back to Europe.
Then comes Beijing, which represents perhaps the trickiest relationship of all. Modi is preparing for his first trip to China in more than seven years, where he will meet President Xi Jinping and stand alongside Russian President Vladimir Putin. While Beijing says the event is a display of solidarity, tensions between India and China remain unresolved.
Border clashes in 2020 killed at least 20 Indian soldiers, prompting a freeze in high-level engagement. Since then, India has banned hundreds of Chinese apps, tightened foreign investment rules, and promoted self-reliance in key sectors. Yet trade between the two countries still hit $118 billion last year, with India importing far more than it exports. This imbalance frustrates Delhi but also underscores why cutting ties is not realistic.
Analysts say Modi is unlikely to secure a major breakthrough when he visits Tianjin. But showing up is a signal in itself — that India is willing to keep lines of communication open, even while deepening defense ties with Washington and buying cheap oil from Moscow.
Step back, and India’s position looks clearer. The U.S. is its biggest customer but also its harshest critic. Russia keeps the lights on, but at a political cost. China is the rival next door, yet too big to ignore. Delhi calls its approach “strategic autonomy.” It has worked for decades, but today the balancing act is under more pressure than ever.
Which brings us back to that dinner party. India wants all three guests to remain seated, however awkward the conversation may be. The real test is whether Modi can stop someone from banging the table, throwing down their fork, and storming out.
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Richard Rossow, Senior Adviser and Chair on India and Emerging Asia Economics at the Center for Strategic and International Studies (CSIS), said that a deal between the U.S. and India is “still very much possible” as the South Asian country puts forth substantial sweeteners.
Arnab Mitra, India consumer analyst at Goldman Sachs, said there could be a mass consumption revival in India driven by rural demand and upcoming GST reforms.
Meera Shankar, former Indian ambassador to the U.S., said India will not be able to entirely open up its agricultural sector because of domestic political sensitivities.
Need to know
Trade negotiations between India and the U.S. still ongoing. India’s Foreign Affairs Minister Subrahmanyam Jaishankar said that India has “some redlines in the negotiations, to be maintained and defended.” He added that “it is our right to make decisions in our ‘national interest’.”
India and Russia reaffirm plans to boost bilateral trade. The two countries have vowed to expand their trade ties in a move indicating that U.S. President Donald Trump’s hefty tariffs on New Delhi over its purchase of Russian oil are unlikely to impact their partnership.
Former Reserve Bank of India Governor urges India to reassess Russian oil purchases. Raghuram Rajan said that Trump’s hefty tariffs send New Delhi a clear “wake-up call” to reduce its dependence on a single trading partner. He added that it is now important for India to “ask who benefits and who is hurt.”
– Amala Balakrishner
Quote of the week
People on the street are looking at China and comparing it to India. People who have been away from the Chinese markets think it’s time to move back. But, I do think this is a relatively short-term thinking. India is still going to do very very well from a longer-term perspective.
— Mark Mobius, founder of Mobius Capital Markets
In the markets
Indian markets fell Thursday, after a holiday the day before. It marked the first session since the additional 25% tariffs on Indian exports to the U.S. kicked in on Wednesday.
The benchmark Nifty 50 was down 0.85%, while the BSE Sensex index fell 0.87%. The 50-stock Nifty 50 has risen over 3% since the start of the year, while the BSE Sensex is up 2%.
The benchmark 10-year Indian government bond yield fell to 6.58%.
Coming up
August 28: Industrial and manufacturing production for July
August 29: GDP for the second quarter
August 29-30: Prime Minister Narendra Modi visits Japan to participate in the India-Japan annual summit
September 1: HSBC manufacturing PMI for August
September 3: HSBC services PMI for August; pharmaceutical research and manufacturer Anlon Healthcare and engineering and construction firm Vikran Engineering launch IPO
Each weekday, CNBC’s “Inside India” news show gives you news and market commentary on the emerging powerhouse businesses, and the people behind its rise. Livestream the show on YouTube and catch highlights here.
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