Geopolitical Monitoring Report for India: Focus on Trade Deals and Energy Shifts

Bottom Line

The release of the India-US trade deal framework and shifts in oil purchases will benefit trade and energy sectors, but parliamentary disputes may increase investor uncertainty. Investors should monitor parliamentary approval of the deal and changes in the energy sector.

Key Developments

1. India-US Trade Deal Framework Released — On 9 February 2026, the India-US trade deal framework was released, wherein the US reduced tariffs from 50% to 18% and removed the 25% penalty tariff, and India pledged to eliminate the digital services tax (this claim was later retracted in subsequent news). Investment Relevance: This will improve trade relations and boost export sectors like IT, gems & jewellery, textiles, machinery, chemicals, and automobiles, but parliamentary disputes could negatively impact investor sentiment.

2. India Directs Increased Purchase of US Crude Oil Over Russia — On 12 February 2026, the Indian government directed state-owned oil companies to increase crude oil purchases from the US instead of Russia and reduce imports from Russia, marking a major energy strategy shift. Investment Relevance: This is positive for US oil exporters but may increase risks for investors linked to Russian oil supply chains and could affect energy costs.

3. India-Malaysia Agreements on Semiconductors, Digital Payments, and AI — On 9 February 2026, during the bilateral meeting between Indian Prime Minister Narendra Modi and the Prime Minister of Malaysia, six key agreements were made on semiconductors, digital payments, and artificial intelligence, including the launch of UPI services and opening a new consulate. Investment Relevance: This will strengthen India's partnerships in the IT and technology sectors, particularly expanding market access and investment opportunities through the expansion of semiconductors and digital payment systems.

4. Impact of Bangladesh Election 2026 on India's Northeastern Security — On 12 February 2026, Bangladesh's general election could directly impact the security of India's northeastern states, as a win by the BNP-Jamaat coalition may increase border security concerns, with the 4000 km border being a point of worry. Investment Relevance: Regional instability could increase investment risks in infrastructure, energy, and mining projects in northeastern regions, necessitating investor vigilance in related sectors.

5. US Removal of India's Map and Diplomatic Tensions — On 12 February 2026, the US Trade Representative's office removed an official map that showed Pakistan-occupied Kashmir and Aksai Chin as part of India, reportedly under pressure from Pakistan, potentially creating tensions in India-US relations. Investment Relevance: This diplomatic issue could affect the stability of the trade deal, increasing investor uncertainty and necessitating monitoring of bilateral relations.

Sector Implications

Details:

• IT: The elimination of the digital services tax in the India-US trade deal (though later retracted) and India-Malaysia semiconductor and AI agreements will open new markets and investment opportunities for the IT sector, while the relocation of US manufacturing to India could increase technology collaboration.
• Mining: The mining sector is not directly mentioned in the news, but India-Greece industry and defence deals may include critical minerals, and regional events like the Bangladesh election could impact resource extraction, hence the impact is neutral and investors should monitor regional stability.
• Energy: Increasing oil purchases from the US and reducing Russian oil imports will diversify energy supply, and the US refund of the 25% penalty tariff amounting to ₹400 crore will provide relief to the energy sector, but reduced dependence on Russian oil may lead to fluctuations in supply chains and prices.

Geopolitical Pulse

Risk Watch

• Delays in Parliamentary Approval of India-US Trade Deal — Opposition's adjournment motion and labelling the deal as one-sided could lead to parliamentary debate and approval hurdles, causing market uncertainty and negatively impacting investor sentiment. Timeline: Near-term. Probability: Medium.

• Regional Instability from Bangladesh Election Results — A win by the BNP-Jamaat coalition could strain India-Bangladesh relations, increasing border security concerns and creating investment risks in the northeastern region. Timeline: Near-term. Probability: High.

• Escalation of US-India Diplomatic Tensions — The US removal of India's map and comments on Russian oil purchases could highlight bilateral differences, affecting the trade deal and energy cooperation. Timeline: Medium-term. Probability: Low.

Outlook

Key dates and events to monitor:

• Announcement of Bangladesh Election 2026 results and subsequent political situation, which will impact India's regional security.
• Parliamentary debate and approval process for the India-US trade deal, including the opposition's adjournment motion.
• Further talks on border peace and bilateral relations following the India-China strategic dialogue, which could affect trade and investment.

Strategic consideration: Geopolitical trends point towards India strengthening trade and technology partnerships with the US and Southeast Asia (e.g., Malaysia), but domestic political disputes, regional security challenges (Bangladesh and China), and shifts in energy purchases can sustain both investment risks and opportunities.