Hopes of an India–US trade deal have taken a fresh hit after a senior US official said negotiations collapsed because Prime Minister Narendra Modi did not personally call US President Donald Trump to seal the agreement.
The remarks have triggered fresh concerns in markets already rattled by high tariffs, a weak rupee and uncertainty over India’s oil trade with Russia.
According to US Commerce Secretary Howard Lutnick, trade talks between the two countries fell apart last year due to a breakdown in communication at the highest political level. Speaking on a US business podcast, Lutnick said the deal was largely ready but required a final call from Modi to Trump to close it, a Reuters report noted.
“It was all set up. You just needed Modi to call the president,” Lutnick said. “They (India) were uncomfortable doing it. So the call never happened.”
After talks collapsed, Trump sharply raised tariffs on Indian goods in August, doubling them to 50 percent — the highest tariff rate imposed by the US on any major trading partner. This included a 25 percent retaliatory tariff linked to India’s continued purchases of Russian oil.
Earlier this week, Trump again warned that tariffs could rise further unless India reduces its oil imports from Russia. The statement rattled investors, pushed the rupee to a record low, and added pressure on Indian equities already facing global uncertainty.
India was earlier seeking a tariff arrangement that fell between the US deals offered to Britain and Vietnam. However, Lutnick said that offer has now expired.
Media reports had earlier said that India and the US were very close to a deal in 2025. However, an Indian official involved in the talks said Modi avoided a direct call with Trump due to concerns that the conversation could become one-sided and politically risky.
Indian officials are said to prefer structured negotiations through diplomatic and trade channels rather than high-stakes personal calls, especially when key issues like tariffs, oil imports and sanctions are involved.
The stalled trade deal adds to India’s challenges at a time when exports are under pressure and global trade conditions are tightening. Higher US tariffs make Indian goods less competitive, particularly in sectors such as textiles, engineering goods and pharmaceuticals.
For markets, the uncertainty is another negative factor. The rupee has already weakened sharply, and sustained trade tensions could hurt foreign investment flows.
Unless both sides return to the negotiating table soon, analysts warn that India–US trade relations could remain strained, with direct consequences for growth, currency stability and investor confidence.
