U.S. and Indian trade negotiators kick off two days of talks on Wednesday as they seek to reach an elusive deal amid tensions after Washington hit New Delhi with huge tariffs over its purchases of Russian oil.
The 50% levies on most goods were imposed in August, with U.S. officials arguing the imports of discounted Russian crude effectively bankroll Moscow's war in Ukraine.
Deputy U.S. Trade Representative Rick Switzer's visit comes a week after Prime Minister Narendra Modi welcomed Russian President Vladimir Putin in New Delhi.
India's foreign ministry described Switzer's meetings as a "familiarization" trip.
India was among the first countries to begin trade talks after U.S. President Donald Trump unveiled sweeping tariffs on most of the country's trade partners in April.
But it is one of the few major economies still without an agreement, raising risks for jobs, economic growth and markets.
India is the world's fastest-growing major economy and it recorded a $45.8 billion goods trade deficit with the U.S. in 2024.
Large export categories such as smartphones and generic drugs are exempt from Trump's tariffs, but many labor-intensive industries are not.
That's a serious blow for a country already struggling to generate well-paid jobs for millions of young graduates, and the turmoil threatens Modi's ambition to lift the country into high-income status.
Exports fell nearly 12% year-over-year in October, driven by a drop in U.S.-bound shipments.
The Global Trade Research Initiative (GTRI) estimates that labor-heavy sectors such as gems and jewelry, textiles and seafood saw export drops of between 37% and 60% from May to September.
Foreign investors have dumped more than $16 billion in Indian equities this year, helping push the rupee to a record low past 90 per dollar.
The International Monetary Fund (IMF) has also cut India's 2026-27 growth forecast from 6.4% to 6.2%, assuming "prolonged 50% U.S. tariffs."
Exports could shrink to about $49.6 billion this fiscal year, from $86.5 billion last year, potentially knocking up to 80 basis points off growth, according to the GTRI.
India enthusiastically bought discounted Russian crude after the 2022 invasion of Ukraine as Moscow was hammered with severe sanctions, including on its sale of oil.
But Trump's decision to link trade policy to geopolitics upended U.S.-India relations in August, with roughly half of the tariff burden stemming from Washington's attempt to penalize those purchases.
The U.S. president has repeatedly claimed India either plans to stop, or has already mostly stopped, buying Russian oil, a claim New Delhi has neither confirmed nor denied.
Still, when in the Indian capital, Putin offered to "continue uninterrupted shipments of fuel." Modi did not comment directly on oil flows.
However, top buyer Reliance Industries said in November it stopped importing Russian oil for its export-focused refinery, while smaller refiners like HPCL-Mittal Energy have said they have stopped entirely.
Analysts at trade intelligence platform Kpler expect a "notable dip" in India's December-January imports.
Whether that decline will sway Washington is unclear.
Talks also stalled over agriculture, with India resisting pressure to cut tariffs on staples like rice and wheat, wary of angering its farmers, a politically powerful constituency.
A senior Indian commerce ministry official told Agence France-Presse (AFP) that these issues are "largely resolved," although Trump on Monday also criticized the country for "dumping" rice into the U.S.
Negotiating a trade pact is complicated by the need to address Trump's so-called reciprocal tariffs, though both tracks are linked, officials say.
"These are two separate, parallel negotiations that are going on, but one will feed into another," Commerce Secretary Rajesh Agrawal told an industry event last week.
Relations have improved since August, with several smaller deals advancing.
That includes U.S. approval in November for two arms sales worth nearly $93 million, and New Delhi's "significant" deal for the United States to supply nearly 10% of its liquefied petroleum gas (LPG) imports.
Energy commitments have anchored past U.S. trade deals, and experts say the LPG contract may help convince Washington that India is reducing its reliance on Russia.
