Editorial: Besieged at home, befuddled abroad

At a time when the BJP-led Union government is under siege from the nationwide youth movement, a number of adverse geopolitical developments are threatening to queer the pitch for the Narendra Modi regime. The resurgence of the US-Iran war, the closure again of the Strait of Hormuz, the Houthis’ restrictions on Saudi shipping through the Bab al-Mandab Strait and Donald Trump’s decision to slap 100% tariffs on generic drug imports all make for a perfect storm for a beleaguered administration. The fact that New Delhi seems to be unable to influence any of these developments points to a foreign policy that is adrift and unable to pivot at a challenging time.

As a direct consequence of Donald Trump’s renewed aggression on Iran, the Houthis in Yemen announced a blockade of shipping through the Bab-al Mandab this week. Although this is not a total closure, and applies only to Saudi tankers, vessel crossings in the Red Sea have fallen more than 50% in the past three days due to the freeze effect on insurance. Roughly 12-15% of India’s crude imports, mainly Russian crude, come through this route, which has so far served as an alternative supply channel for India. With the straits of Hormuz and Bab-al Mandab simultaneously constricted, India is likely to bear the brunt of choked oil supplies. While alternative, but longer, routes around Africa are being used by Saudi and other GCC suppliers, shipping, insurance and freight costs are likely to rise significantly for India in the months ahead.

A further expansion of the US war on Iran is likely to affect all navigation to Saudi Red Sea ports, further disrupting oil supplies to Asia, and leaving India on an energy precipice. As a country that imports 80% of the crude oil it needs, it’s perplexing that India appears to have no room for manoeuvre. An obvious question it has to answer is how New Delhi’s foreign policy pivot to an Israel-US axis has served its interests if it cannot make sovereign energy decisions anymore?

The other adverse announcement for the Modi government this week was Trump’s announcement that the US will levy 100% tariffs on generic drug imports from August 2028, going up to 200% in 2029. India’s exposure to the latest Trump quirk is substantial. India exports generic medicines worth $9.7 billion to the US, which account for 38% of its total pharmaceutical exports. Any loss of market share and forex earnings due to this fresh imposition will only add to the forex hit India is currently taking due to other Trump tariffs, slowing down of IT services exports due to artificial intelligence and higher energy import costs.

Trump’s tariff demand is aimed at forcing pharma companies to set up operations in the US. That option would be unfeasible for Indian companies because not only would manufacturing in America require massive investment but also deprive them of the low-cost advantage India offers.

Some 40% of America’s imports of generic drugs come from India, and a 100% tariff is impossible to absorb and will be passed on to the consumer. India can consider itself to be in a position of strength in that respect, but that heft is useless if the Modi government is unable to exercise even minimum leverage vis-à-vis Washington.