Images of Indian Prime Minister Narendra Modi in a huddle with the leaders of China and Russia do not presage the reordering of the international system.

However, they do highlight that the current tensions in US-India relations are not just a bilateral issue. They have wider implications, including for Australia’s relationship with India, which does not swim in its own undisturbed lane.

Strong US-India relations are not a prerequisite for strong Australia-India relations. But there is no question that the uplift in US-India ties, stretching back to their India nuclear deal framework of 2005, made the uplift in our own relationship with India easier, including the change in Australia’s position on exporting uranium to it.

Are we now seeing a reframing of the strategic rationale of US-India relations, or is this a dispute over trade and market access that will, in time, be resolved?

To pose that question invites an even bigger question. Is US President Donald Trump walking away from the idea of India as a crucial player in a collective pushback against China’s ambition to achieve regional hegemony?

Trump’s hefty tariffs against India reflect many factors: personal pique at its dismissal of his peace-making efforts in the four-day India-Pakistan war, adept positioning by Pakistan built on flattery and adding to the wallet of the Trump family, and yet another example of him reaching for tariffs to fix anything he does not like.

In doing so, Trump has abandoned decades of patient US cultivation of India as a strategic partner in the larger calculations of how to manage China’s ambitions.

On this, Australia was on a unity ticket with the US. We saw India as a key element in the balancing of China, and we saw that balancing as led by the US and including other countries such as Japan, which, for their own reasons, were uncomfortable with a Chinese hegemony.

That was the clear, but rarely publicly articulated, objective of the Quad. Does it remain so, and will Quad leaders still meet in India this year? We know that the US State Department and the Pentagon are Quad enthusiasts, but is Trump? His instincts are unilateralist, whereas the Quad is premised on collective action. Also, the Quad is primarily a geopolitical construct, while Trump’s world view is geoeconomic at best.

Nor do we know what Trump’s broader view of China is. All the signs point to him wanting a big deal with it. But what kind of deal, and where would it leave India and Australia?

Will it be confined to trade and tariffs, or will it also involve strategic accommodation? If so, will that extend all the way to a G2 arrangement where the US essentially acknowledges a Chinese sphere of influence? Unlikely, but that would be a very different world for Australia and India.

Modi’s presence in Shanghai this week does not signal India’s abandonment of the US. India was moving steadily, well before the US tariffs, to stabilise its relations with China. And embracing Russia has been India’s policy since its independence. For India, the US remains the country that is most crucial to realising its ambitions to become a developed economy and a pole in its own right in what it sees as an inevitably multipolar world.

Modi’s over-investment in his personal relationship with Trump now looks like a bad bet. But the Indian drivers of the relationship are largely unchanged, although they may now have to wait until Trump leaves the scene.

Nostalgia for Nehru-style non-alignment

Where does this leave Australia’s strategic relationship with India? If the rift in US-India relations pushes India further down the path of a narrow strategic autonomy, back to India’s old non-aligned days, the strategic relationship with Australia would diminish. Within some quarters of the Indian elite, there is still a nostalgia for Nehru-style non-alignment. And Modi, never far from domestic calculation, wants to show Indians who feel betrayed by Trump that India has other options.

But our relationship with India could also go in the other direction, if both Australia and India decide that a shift in US policy requires even deeper compensating relationships in the region. This is the more likely outcome because both countries have reached a point where each sees value in a deeper partnership, irrespective of the trajectory of the US-India relationship.

The economic pillar of the Australia-India relationship is also not insulated from broader trends in the global economy. Trump’s tariff hammer is likely to result in slower growth in global trade flows. This could mean slower growth for Australia’s and India’s economies, even if our bilateral economic relationship with India continues to grow.

In all of this, India is beginning to rethink its policy on market access. This is still well short of a Damascene conversion, but it should make the conclusion of the so far elusive Comprehensive Economic Co-operation Agreement with India a more realistic prospect. We will, however, need to be alert to the risks that any India-US FTA might present to our access to the Indian market, especially in agriculture.

The third pillar of our bilateral relationship, the Indian diaspora, is going from strength to strength. Already a million strong and the fastest growing large diaspora, it is becoming a key link between our countries.

But we still have a way to go in developing a comprehensive strategy for how best to deploy the Indian diaspora. We need to make the shift from thinking about them in multicultural terms to harder foreign policy and trade terms. The diaspora does not belong exclusively to any one side of the bilateral relationship. It should be seen as a shared asset.

The future is never a straight line, but India still offers Australia more growth opportunities than any single market globally. Ours is a relationship anchored in hard strategic and economic interests, and leavened with close people-to-people ties. That is a strong foundation.

This is an edited text of a speech to the Australia India Business Council.

Republished from Australian Financial Review, 5 September 5 2025

The views expressed in this article may or may not reflect those of Pearls and Irritations.