India-US ties are looking up, but the Russia and Iran sanctions bill, FCRA & BRICS will test reset

US-India relations have improved since last year's tariff onslaught and political troubles. Activity at the functional level is substantial, especially in the defence arena with a new 10-yr framework agreement signed and sale of anti-tank Javelin missiles underway. Indian exports to the US grew by 5.5%, reaching nearly $60 bn in the first 9 mths of FY26.

But there's trouble too. Delhi doesn't have a real sense of what the contours of US policy are towards India, especially after a top State Department official publicly declared in March that the US would not 'make the same mistakes with India that we made with China 20 years ago... let you develop all these markets and then the next thing we know you're beating us in a lot of commercial things.' The statement lit a spark, and everyone was ready to believe the worst.

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No surprise that Delhi got busy wooing other partners, creating extra geopolitical options for itself. But the basic premise remains: the US is a crucial partner. The Indian establishment is careful not to use fighting words or engage in a tit-for-tat. Meanwhile, Donald Trump is bogged down in a war that he can't end, a shaky bond market, a $40 tn debt, and a looming midterm election that's making Republicans nervous.

Three unrelated developments may create further complications in this somewhat uncertain phase in US-India relations:

1. Sweeping Russia and Iran sanctions bill, which has bipartisan support and targets India, China and three others. First introduced in April 2025, it calls for 100% tariffs on the 5 top buyers of Russian oil. It got a fillip after its original proponent Lindsey Graham died last month.

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The bill soon cleared the Senate with an 86-11 vote. Both Dems and Republicans used Graham's demise to pressure the White House, whose main occupant is not a natural Russia critic, as the rest of political Washington. The bill must still go through the House before being signed into law by the president.

Trump is believed not to be particularly enthusiastic about using the lever. He knows putting 100% tariffs on Chinese exports would trigger an equal and opposite reaction from Beijing. Besides, Xi Jinping is expected in DC on Sep 24, and a lot is riding on the visit. In other words, the bill may be held in abeyance.

2. India's Foreign Contribution (Regulation) Act (FCRA), which has riled up both Republicans and Democrats. This has been kicked down the road.

The Modi government has sent the controversial Act to a joint parliamentary committee after criticism from Opposition leaders and a couple of US lawmakers that it targets particular religious groups. The Act will get a second look. But don't expect an overhaul - a majority of MPs in the 31-member committee are from the ruling coalition.

India's ambassador Vinay Kwatra recently made a rare intervention on X earlier this month to debunk the 'myth' that FCRA would cut foreign funding to civil society organisations. Foreign money flows to registered entities have been rising, and places of worship have an additional layer of protection in case their registration is cancelled. Their assets can be transferred to another FCRA-compliant group of the same faith, he stressed.

In any case, the US has its version of registration and compliance for foreign entities, as do Australia, Britain and Canada. As always, US domestic politics and constituent pressure will determine the level of hypocrisy when dealing with another country. Christian groups are a vocal, powerful voting bloc.

3. The upcoming BRICS summit in Delhi, which works as a magnet for negative attention in Trump's world. The president has a visceral dislike of the grouping. He's convinced it's a rogues' gallery designed to undermine US dominance and the dollar. A group photo of Modi with Iranian president Masoud Pezeshkian, Vladimir Putin and Xi in Delhi could set him off, with attendant courtiers stoking the fire, even though Trump has hosted the Russian president and is about to welcome the Chinese leader.

His energetic envoy, Sergio Gor, will try to deflect. But he can't change Trump's fundamentals. Gor is doing his best to shift the US-India dynamics from political stasis to political excitement, travelling from Kerala to Kashmir. So, is he travelling more because he finds 'Hunuz Dilli door ast' and preoccupied with other ventures?

Gor's recent statement on Kashmir being 'an important part of India' got significant attention. It was designed to. The visit wasn't innocent just as Marco Rubio's visit to Mother Teresa's Missionaries of Charity in Kolkata in May wasn't.

But reading too much into a word is folly, especially when every part of India by definition is 'important' for the people and the state. The word 'important' falls comfortably between anodyne and provocative.

If Gor meant business, he would have said Kashmir is an 'integral' part of India. Reality is that US ambassadors visit both sides of Kashmir when they find it necessary to curry favour with their hosts, or send a signal. Gor's visit and words were a positive signal to Delhi, no doubt. But they do not represent a major shift. If anything, his boss remains enthralled by the field marshal next door.