India Has Leverage Against the US and China

Takshashila Institution | Lokendra Sharma, Pranay Kotasthane

India can deploy immediate, targeted leverage to impose strategic and economic costs on the United States and China to counter recent bilateral transgressions. These provocations include a US strike killing three Indian seafarers on the MT Settebello off Oman and Chinese rare earth export controls that halved Bajaj Auto's Chetak electric scooter production in July 2025.

To move beyond muted diplomatic responses, New Delhi must exploit areas of high political salience and asymmetric vulnerability. Against Washington, viable countermeasures include altering defence procurement from American contractors, establishing a SAMR-style regulator to target US corporate mergers, and delaying the bilateral trade deal. Beijing presents a different challenge. To pressure the Chinese Communist Party, India can upgrade economic ties with Taiwan through a free trade agreement, sell defence hardware to China's neighbours, and conduct freedom of navigation missions in the South China Sea and East China Sea.

Comment

New Delhi's transition toward active cost imposition, particularly through the proposed establishment of a domestic market regulator modelled on China's State Administration for Market Regulation, represents a structural shift in Indian strategic autonomy. This regulatory mechanism directly leverages India's massive consumer market to block mergers involving American companies, creating immediate political salience within the US corporate lobby. By targeting high-exposure commercial transactions rather than relying on broad tariff wars, India can exploit specific asymmetric vulnerabilities without triggering immediate, devastating retaliatory spirals. This approach transforms market access into a precise instrument of deterrence against unilateral US legislative actions like the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026.

The operational execution of this regulatory leverage relies on the Competition Commission of India delaying or conditioning global mergers that require local market clearance. For instance, transactions involving US tech giants or agricultural conglomerates would face prolonged antitrust scrutiny, directly impacting their global valuation and shareholder confidence. This bureaucratic friction weaponises administrative delay, forcing Washington to calculate the domestic corporate cost of its unilateral sanctions under the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 before enforcing them against Indian entities.

Strategic Question for Discussion

If the Competition Commission of India begins systematically delaying mergers of US firms in response to the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, does this regulatory weaponisation risk triggering reciprocal US tech export restrictions that outweigh India's domestic market leverage?

The available evidence suggests that while US tech giants would lobby Washington to protect their market access, the strategic value of critical technologies makes them highly vulnerable to retaliatory export controls. My assessment is that India's regulatory leverage is most effective as a short-term deterrent, but prolonged regulatory friction would likely accelerate US efforts to diversify supply chains away from Indian entities.

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