How US Trade Pressure Could Hurt India’s Solar & AI Push

Vijay Kumar Dhar

3 hours ago

The India-US bilateral trade agreement, announced in February 2026, was expected to be finalised by April this year. However, the deadline has now passed without an agreement being reached, as the unpredictable tariff policy of the Trump administration has rendered the original terms commercially obsolete. Commerce Secretary Rajesh Agrawal confirmed that India would only sign the deal once Washington had established a predictable tariff architecture. However, rather than providing this certainty, the US has increased pressure on Delhi. The Office of the United States Trade Representative (USTR) has launched Section 301 investigations targeting sectors that are critical not only to Indian exports but also to its broader ambitions to become a leader in AI and renewable energy.

A Deal Delayed, Pressure Intensified

Under Section 301 of the 1974 Trade Act, the USTR has the power to impose tariffs, restrict imports, and suspend trade agreement concessions. Furthermore, these investigations establish a framework for secondary sanctions. While such investigations undermine the trust of international partners, Indian exporters may also face tighter inspections, more stringent documentation requirements and supply chain audits. These measures would increase compliance costs and disrupt established trade flows. The sectors targeted by the current investigation are among India’s most sensitive export industries, including solar modules, pharmaceuticals, steel, and textiles. Of these, solar module manufacturing has attracted the most scrutiny. US officials have noted that India’s renewable energy manufacturing capacity is now around three times higher than domestic demand. Washington characterises this surplus as a potential source of global oversupply requiring remedial action.

In the context of trade deals and exports, India’s production of solar energy equipment is significant.

The US is a key market, importing around 97% of India’s total solar production, which is estimated to be worth more than $792 million. Indian-made modules are 19-21% cheaper than US-manufactured alternatives, making them highly competitive for utility-scale projects. This has allowed India to increase its share of US solar imports from 3% in 2022 to around 11% in 2024. However, the US market was effectively closed to Indian solar manufacturers at the beginning of this year, when the US Department of Commerce imposed a preliminary countervailing duty of 126% on Indian solar cells on 24 February 2026. The current investigation could further weaken India’s position.

Powering the Future

Meanwhile, the renewable energy and solar industry is much more than just an export sector. It is also a cornerstone of India’s wider strategy to become a world leader in energy, artificial intelligence, and information technology. According to the 27th report of the Standing Committee on Communications and Information Technology, which was presented to Parliament on 30 March 2026, India’s data centres currently consume around 1,020 MW of power. This figure is expected to double within two years and reach 4,000-5,000 MW within four to five years. At the India AI Impact Summit, MeitY Secretary S. Krishnan outlined that the process begins with power, followed by computing, models and finally data. Without a reliable power infrastructure in place, it is impossible to progress to the next stage. A recent assessment of the renewable energy industry suggests that capacity could increase from 45 GW to 95 GW by 2027, with an estimated $14 billion of capital expenditure supporting this growth. The major private companies spearheading this expansion are Waaree Energies, Premier Energies, Adani Green Energy Limited (AGEL) and Reliance New Energy (RNE).

Targeting the Largest Players

Against this backdrop, the targeting of renewable energy companies such as AGEL and RNE by the US is no coincidence. Both companies are deeply integrated into India’s manufacturing expansion. AGEL, India’s largest renewable energy company, added 5,051 MW of capacity in FY26 — one of the fastest greenfield expansions globally outside of China — increasing its total operational portfolio to 19.3 GW. The company’s flagship project, the Khavda site in Gujarat, is billed as the world’s largest renewable energy park under development. It has already reached 9.4 GW of installed capacity, and is expected to reach 30 GW by 2030. Spanning 538 square kilometres, the site uses advanced bifacial solar modules, solar trackers and waterless robotic cleaning systems, as well as some of the most powerful onshore turbines in the world.

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Reliance New Energy is projected to reach approximately 6.4 GW of cell capacity, positioning it alongside India’s top producers, AGEL (19.3 GW), Waaree Energies (15.4 GW) and Premier Energies (10.6 GW). Reliance Industries’ energy division has also commissioned the production of heterojunction solar cells in Jamnagar, achieving module yields of 94-95%. The company is building an end-to-end solar manufacturing chain, from polysilicon to modules, with an initial annual capacity of 10 GW, which is scalable to 20 GW. Construction of the gigafactory is underway, and the company has identified the potential to host 125-150 GW of solar capacity at its 5,50,000-acre site in Kutch.

Corporate Influence as a Diplomatic Tool

US pressure on the Adani Group predates the current trade investigations and has been sustained across multiple fronts. In early 2023, US short seller Hindenburg Research published allegations of stock manipulation and accounting fraud against the conglomerate. The group has denied these claims, which remain unproven in court, and they triggered a market rout that erased billions in valuation. Then, in November 2024, the US Department of Justice and the Securities and Exchange Commission indicted Gautam Adani and seven associates in a separate criminal case, where they were accused of paying approximately $250 million in bribes to undisclosed Indian government officials to secure solar energy contracts. The Adani Group later denied these allegations. The case has since remained dormant on the federal docket. Most recently, the US Treasury’s Office of Foreign Assets Control opened a civil investigation into whether Adani-linked companies imported Iranian liquefied petroleum gas using shipping routes intended to evade sanctions. Taken together, these actions point to a pattern of sustained scrutiny applied at moments when broader US-India trade negotiations and strategic engagements are underway, suggesting that Washington sees pressure on major Indian conglomerates as a useful instrument of leverage.

The US has been keeping a close eye on Reliance Industries, one of India’s most strategically significant private-sector players. The company was previously one of the Indian refiners that faced American sanctions and swiftly distanced itself from Russian crude following last year’s tariff threat.

According to a Reuters report, Reliance stopped accepting new orders for Russian oil to be delivered in March-April by spring 2026. Instead, Reliance increased its imports of US crude oil, acquiring several cargoes of American West Texas Intermediate in late 2025 and early 2026 to supply its Jamnagar refineries. US records show that Reliance purchased two million barrels of WTI for future delivery at the end of 2025. In February 2026, the company also won a U.S. licence to import Venezuelan crude oil. The only thing that turned the situation back was the U.S. war against Iran. However, these shifts align with Washington’s desire to reduce India’s reliance on adversarial suppliers. Nevertheless, Reliance remains under scrutiny.

Leverage Through Markets

The opposition in India has repeatedly alleged that these ties create a conflict of interest. In August 2025, for example, Rahul Gandhi charged that the present government’s reluctance to confront US tariff threats stemmed from a fear of exposing “financial links” with business elites. Although these allegations originate from political opponents and are denied by the government, they reflect an existing political discourse that US authorities can exploit. Washington may be seeking to exert influence through channels beyond formal diplomatic engagement by initiating investigations, issuing information requests, and applying extraterritorial pressure to the leadership of key Indian companies.

This approach of the United States of imposing tariffs, launching sectoral investigations, and applying extraterritorial pressure on Indian corporates constitutes a coherent strategy of coercive diplomacy. However, such tactics fundamentally contradict India’s long-standing foreign policy principles. With public hearings on the Section 301 investigations scheduled for May 2026, and final determinations due to be made later this year, New Delhi’s ability to resist coercive trade practices will be put to the test.

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