As the world reorients into a bipolar power struggle between the USA and China, India is often touted to be the counterbalancing force to China, mainly due to geographical proximity, size and population. In the post-USSR world and since economic reforms in 1991, India became strategically coupled to the USA and economically coupled to China. Since 2014, it has often been argued that India has started to decouple from China and become closer to the USA, both strategically and economically. This article shows, with the help of the publicly available data, that while India has struggled to move out of the economic dominance of China, it has remained equidistant from the USA as well. The analysis covers mainly trade and defence, while keeping the general economic, developmental and political aspects in the backdrop.

Free Trade Agreements have gained momentum in a world with a flailing multilateral system of negotiations. The increased might of China has also pushed the global North including the EU and the USA to fall back on increasing direct trade linkages with the global South to counterbalance Chinese comparative advantages. India has emerged as the main contender for considering FTAs, particularly to counterbalance China. India also needs these FTAs for strategic reasons, such as growth, technology transfer and for geostrategic purposes. India and the USA have a broad agreement on the need for a FTA; however, some points of divergence remain. For the USA, stricter protection of intellectual property rights and more freedom for US tech firms are the major demands. India, on the other hand, is firm on more regulation for e-commerce firms and local data storage rules and demands greater access to US agricultural markets. While both countries have strategic reasons to become a closer trade partner, domestic lobbies or perceptions of national interest hold back the negotiators of both sides.

Data on the importance of US–China trade and fundamental trade theory suggest that the USA is in a relatively weak position in its trade war. Not only will the protectionist measures of the Trump administration reduce the welfare of American citizens (theory of competitive advantage) but they also pose a threat of triggering an inflationary cycle. The imposition of tariffs on soybeans by China has strategically hit core Republican voters in states like Iowa, risking the political prospects of Republicans in future elections. Thus, the current administration should reconsider the feasibility of continuing the trade war against China given the economic and political risks.

Labour market data in India shows female participation declining as GDP has increased, a phenomenon found in other East Asian economies over past two decades. This contradicts empirical observations, which argue over the feminization of the work force due to participation in global export markets, primarily driven by wage efficiency of female labour. The impact of the global financial crisis on female participation rates in rural India in 2009-10 is studied with a cross-state analysis to test theories about female unemployment in a downturn. One of the major findings is that as the formal wage difference between men and women decreases, the female participation gap increases, but more data is needed to identify critical causal factors.

Trade data are used to examine the roles played by India and China in the World Trade Organization (WTO) and the implications for their share of global trade. India was a founding members of the WTO whereas China joined in 2001 after much deliberation, negotiation and caution. India has been one of the Organization’s most active members, a key negotiator for the developing world during Uruguay and a main source of obstacles in the Doha rounds of trade liberalisation. India contributes about 2.3% to world trade and is a services trade powerhouse, while China controls 11% of world trade as the world’s factory and as an emergent technology giant.