India has said it will release hydroxychloroquine hours after the US president spoke of "retaliation".
India has agreed to lift an export ban on hydroxychloroquine - a drug US President Donald Trump has called a "game-changer".
The decision came hours after Mr Trump warned of "retaliation" if India did not overturn an export ban on the drug.
India did not respond, but said it would give hydroxychloroquine to "nations that have been badly affected" by coronavirus.
Medical experts have cautioned that there is no proof it cures Covid-19.
What happened between the US and India?
President Trump, who has repeatedly and publicly touted hydroxychloroquine as a possible cure for coronavirus, called Indian Prime Minister Narendra Modi on Sunday, a day after India banned all exports of the drug "without exception".
The decision came even as Indian cases spiked - as of Tuesday, the country reported 3,981 active cases and 114 deaths due to the virus.
The next day, local media reported that India would "consider" the request.
The same day, speaking at a White House press briefing, Mr Trump said he did not "like" India's decision to ban the export of the drug. "But of course, there may be retaliation. Why wouldn't there be," he added.
India's statement on Tuesday also said that apart from "nations badly affected by the virus" it would supply the drug to neighbouring countries in "appropriate quantities" given the "humanitarian aspects of the pandemic".
The US has recorded nearly 370,000 virus cases and almost 11,000 deaths.
What is hydroxychloroquine?
Hydroxychloroquine is very similar to chloroquine, one of the oldest and best-known anti-malarial drugs.
But the drug - which can also treat auto-immune diseases like rheumatoid arthritis and lupus - has also attracted attention over the past few decades as a potential antiviral agent.
President Trump said that the US Food and Drug Administration (FDA) had approved it for treating coronavirus, something the organization has denied. Mr Trump later said that it had been approved for "compassionate use" - which means a doctor can give a drug that is yet to be cleared by the government to a patient in a life-threatening condition.
Doctors are able to prescribe chloroquine in these circumstances as it's a registered drug.
In India, hydroxychloroquine could be bought over the counter and is fairly inexpensive.
But its purchase and use has been severely restricted ever since it was named as a possible treatment for Covid-19.
Does it work against Covid-19?
"Chloroquine seems to block the coronavirus in lab studies. There's some anecdotal evidence from doctors saying it has appeared to help," James Gallagher, BBC health correspondent, explained.
But crucially, there have been no complete clinical trials, which are important to show how the drug behaves in actual patients, although they are under way in China, the US, UK and Spain.
"If it truly has a dramatic effect on the clinical course of Covid-19 we would already have evidence for that. We don't, which tells us that hydroxychloroquine, if it even works at all, will likely be shown to have modest effects at best," Dr Joyeeta Basu, a senior consultant physician in India, told the BBC.
Despite the fact trials are yet to conclude, people have begun to self-medicate - with sometimes disastrous consequences.
There have been multiple reports in Nigeria of people being poisoned from overdoses after people were reportedly inspired by Mr Trump's enthusiastic endorsement of the drug.
An article in the Lancet medical journal also warns hydroxychloroquine can have dangerous side-effects if the dose is not carefully controlled.
This lack of certainty has prompted social media sites like Facebook and Twitter to delete posts that tout it as a cure - even when they are made by world leaders. BBC
Hundreds of new coronavirus cases have been linked to a conference held by the Tablighi Jamaat in Delhi.
A group of young engineers are racing against time to develop a $650 ventilator for Covid-19 patients.