[Answered] Examine the impact of the ‘Sanctioning Russia Act’ and 50% US tariffs on India’s labor-intensive export economy. Evaluate the challenges of sustaining a strategic partnership in the absence of a trade deal amidst a shift toward extreme transactionalism in bilateral relations.

Introduction

India’s exports to the US crossed $85 billion (2024), dominated by labour-intensive goods; however, the Sanctioning Russia Act and 50% US tariffs mark a sharp shift from partnership to coercive trade diplomacy.

From Strategic Convergence to Tariff Weaponisation

1. Legislative Trigger: The proposed ‘Sanctioning Russia Act, 2025’, endorsed by President Trump, mandates 500% tariffs on countries “knowingly engaging” in Russian-origin petroleum and uranium trade, bypassing judicial scrutiny under IEEPA through Congressional sanction.
2. Existing Tariff Shock: India already faces 50% blanket tariffs on several goods, imposed under reciprocal tariff logic and Section 232 investigations, signalling a move towards extreme transactionalism in US trade policy.

Impact on India’s Labour-Intensive Export Economy

1. De Facto Export Embargo: A 500% tariff functions as a prohibitive barrier, effectively eliminating price competitiveness. Trade experts note that such duties would shut India out of the US market, its largest export destination.
2. Sectoral Distress (High Employment Elasticity):

• Textiles & Apparel (Tiruppur, Surat): Thin margins; order cancellations nearing 60–70%.
• Footwear & Leather (Agra, Kanpur): MSME clusters face liquidity stress.
• Marine Exports: Highly price-sensitive, already losing ground to Vietnam and Bangladesh (FTA advantage).

3. Employment Fallout: Labour-intensive exports employ over 45 million workers (Periodic Labour Force Survey). Estimates suggest 2–3 lakh jobs are at immediate risk, undermining inclusive growth.

The Russia-Oil Dilemma: Strategic Autonomy Under Pressure

1. Energy Security Imperative: India sources 35–40% of crude oil from Russia, enabling price stability and inflation control. Abrupt decoupling could raise the import bill by $9–11 billion, worsening current account deficit pressures.
2. Secondary Sanctions and Extra-territoriality: The Act exemplifies secondary sanctions, challenging India’s doctrine of strategic autonomy and violating the spirit of WTO MFN principles.
3. Global Paradox: Ironically, India’s discounted oil purchases helped prevent global price spikes, indirectly benefiting US consumers—highlighting the asymmetry of burden-sharing.

Strategic Partnership Without a Trade Deal: Structural Challenges

1. Absence of Institutional Shield: Unlike Japan or South Korea, India lacks a bilateral trade agreement with the US, leaving it exposed to unilateral tariffs.
2. Stalled Negotiations: Talks broke down over agriculture, dairy access, digital trade and IPR, with India defending food security and livelihood concerns.
3. Investment Uncertainty: A 2025 Bank of America report flags stalled FDI, FPI and debt inflows, forcing the RBI to sell $65 billion to stabilise the rupee, which depreciated nearly 7% YoY.
4. Comparative Disadvantage: China mitigates US tariffs through export diversification, dominance in critical minerals, and sunrise sectors, while India’s export basket remains less technology-intensive.

Way Forward: Navigating Transactional Diplomacy

1. Export Diversification: Fast-track India-EU FTA, deepen ties with ASEAN, GCC, Africa, reducing over-dependence on the US.
2. Energy Rebalancing: Gradual diversification to West Asia, Guyana, Brazil, lowering Russian oil dependence without inflation shocks.
3. Multilateral Pushback: Coordinate with middle powers (Brazil, Indonesia) to challenge extreme tariffs at the WTO.
4. Domestic Competitiveness:
    Move up the value chain via PLI schemes, logistics reforms, and skill upgrading to reduce tariff vulnerability.

Conclusion

As Justice R.F. Nariman observed, economic coercion erodes trust. Echoing President Droupadi Murmu’s call for resilient growth, India must hedge partnerships while safeguarding autonomy in a fractured global order.”