At the Heart of India–USA Ties: Economics & Strategy
26-08-2023
01:17 PM
1 min read
What’s in today’s article?
- Why in News?
- Introduction
- India-US Bilateral Trade Relationship
- India-US Strategic Relationship
- Challenges/Issues w.r.t. India-US Relationship
- Conclusion
Why in News?
- Prime Minister Narendra Modi has headed to the United States for an official state visit on the invitation of President Joe Biden.
Introduction
- At the heart of the Indo-US strategic partnership is the deepening economic engagement.
- India's largest trading partner is the US and it is also one of the few countries with which India had a trade surplus in 2022-23.
- For the US, India is the ninth largest trading partner.
- India's major exports to the US include gems and jewelry, pharmaceutical products, light crude oil and petroleum, electrical and electronics goods, engineering products, apparel, frozen marine products, and others.
India-US Bilateral Trade Relationship
Image Caption: India-US Bilateral Trade Relationship
- In 2022-23, the bilateral trade between India and the USA stood at a record US$ 191 billion as against US$ 119.42 billion in 2021-22.
- In 2021-22, India had a trade surplus of US$ 32.8 billion with the US
- American companies have invested around US$ 60 billion in India in sectors ranging from manufacturing to telecommunications and consumer goods to aerospace.
- And Indian companies have put in more than US$ 40 billion in sectors such as IT, pharmaceuticals, and green energy.
- In February, Air India announced the purchase of more than 200 Boeing aircrafts — a deal which is said to be the largest order placed by an airline in one go anywhere in the world.
India-US Strategic Relationship
- The two governments are pursuing more than 50 bilateral dialogue mechanisms at various levels.
- Quadrilateral Security Dialogue –
- The Quad began as a broad partnership after the 2004 Indian Ocean tsunami, but gained strategic heft after the four-country grouping, which has Australia and Japan alongside India and the US.
- It was repurposed in 2017, primarily as a counter to China’s growing influence in the Indian Ocean rim, and as a forum for redoubling focus on the Indo-Pacific region.
- I2U2 –
- The I2U2 is a grouping of India, Israel, the US and the United Arab Emirates.
- It is focused on joint investments and new initiatives in water, energy, transportation, space, health, and food security.
- Initiative on Critical and Emerging Technology (iCET) –
- This January, National Security Advisor Ajit Doval and his US counterpart Jake Sullivan launched a new US-India initiative on Critical and Emerging Technologies.
- These emerging technologies include artificial intelligence, quantum computing, semiconductors and wireless telecommunication.
Challenges/Issues w.r.t. India-US Relationship
- The US still has significant export controls on India (instituted after the 1998 nuclear test), which inhibits the free transfer of technology.
- Among the outstanding trade issues that require resolution are visa delays and the revoking of India’s trade benefits under the Generalized System of Preferences (GSP) programme in 2019.
- The US has complained about India’s trade policy being overly protectionist, especially with regard to entry barriers for foreign investment and unsteady legal rules.
- India has been raising tariffs over the last few years, reversing an earlier policy of lowering tariffs that endured for decades.
- India will likely be pursued to join the trade pillar of the US-led Indo-Pacific Economic Framework (IPEF).
- India has signed up for three pillars of the IPEF — committed to building more resilient supply chains, tapping clean energy opportunities, and combating corruption.
- However, it has opted out of the fourth pillar (trade) citing reservations about the commitments required on environment, labour, digital trade, and public procurement.
- There is growing disquiet within sections of the Union government over India not finding an entry into the Minerals Security Partnership (MSP).
- MSP is a US-led partnership to secure supply chains of critical minerals that is aimed at reducing dependency on China.
- The MSP is learnt to have weighed the possibility of collaborative work on some 150-odd projects and shortlisted a dozen where members are likely to commence work.
Conclusion
- India-U.S. trade relations have developed into a "global strategic partnership", based on shared democratic values and increasing convergence of interests on bilateral, regional, and global issues.
- Despite the COVID-19 pandemic, India-U.S. cooperation witnessed intense engagement under various bilateral dialogue mechanisms in a wide range of areas such as –
- defence, security, health, trade, economic, science & technology, energy, and people-to-people ties.
- PM Modi’s visit to the US is expected to give India access to critical American technologies the US rarely shares with non-allies, strengthening a new bond that is underpinned by not just global politics but also business and economics.
- Major announcements expected during PM Modi's visit are –
- U.S. approval to General Electric (GE) to manufacture engines in India for its domestically produced fighter jets,
- India's purchase of 31 armed MQ-9B SeaGuardian drones made by General Atomics worth $3 billion, and
- Removal of U.S. obstacles that prevent smoother trade in defence and high technology.
Q1) What does ‘strategic relationship’ between two nations mean?
A 'strategic relationship', as the term suggests, involves a shared understanding between the two or more states involved on the nature of threats in the environment and the place of their collective power in helping mitigate the threats.
Q2) What are India’s major export items?
The top exports of India are Refined Petroleum ($49B), Diamonds ($26.3B), Packaged Medicaments ($19.2B), Jewellery ($10.7B), and Rice ($10B), exporting mostly to United States ($71.2B), United Arab Emirates ($25.4B), China ($23.1B), Bangladesh ($14.1B), and Hong Kong ($11.2B).
Source: At the heart of Indo-US ties: Economics & Strategy | CFR.ORG