India – United States Economic and Trade Juxtaposition

By  Rana Danish Nisar 

The demise of the Soviet bloc brought new changes in the world political system along with the emergence of new opportunities and hopes for the Asian sub-continent state India.

The abrupt changing in the world system and globalization induced policy makers of India to rethink as well as revisit their pattern of thoughts and Foreign Policy for the economic progress of India. After the downfall of Soviet the India’s Cold War policies were not more  suitable for  the effervescent changes in the world. After the adoption of  the “Opening up Policy” China, a very first neighbor in the Asian sub-continent, emerged as rapid growing economic power of Asia.

The Chinese policy of synchronization with the rest of the world under the umbrella of the policy of “Opening up policy” shambled all old traditional thoughts and opened an ocean of opportunities not only for the world but for Chinese own economic progress. Owing to meet with new realities, the India’s reforms in the special context of economics and introducing new trade policies played their role as source of limelight for the globe and particularly for the United States.

Shortly, these fresh economic guiding principle and trade policies improvement, obliged two old estrange democratic nations into engagement and made India as chief trade as well as investment associate with the United States. The role of Clinton president to formulate or cemented the path of deep economic relations between two nations was really appreciated and acknowledgeable. The inauguration of “US-India Trade Policy Forum (UITPF)” in the year of 2005 considered as milestone in the unfathomable economic juxtaposition. Actually, the “UITPF” was the extension of strengthen of economic and trade ties of both nations not only follow bilateral approaches but also multilateral looms. This engagement in economic circle was not only happened in the Clinton president timelines but coherent in mood. In the year of 2010, the value of the export of United States to its associate India was approximately nineteen billion$ and the value of import by United States to India was twenty-nine billion$ and deficit was ten billion$ respectively.

With the worth of forty-eight and seven hundreds billion$ roughly, India was on 12^th number in the list of trading associate with the US in the year of 2010. The economic specialists articulated that the core nature of imports of India from the United States was based on technological as well as non-technological but mostly technological in nature. The product of which were exported by USA to its associate India were including jewelry, the technology and machinery related to nuclear plants like boilers, appliances and electricity machinery with the worth of 4.206, 2.607 and 1.367 billion$ respectively. Along with this export, the export of India to United States were included metals and  jewelry, the goods related to pharmaceutical and oil & fuels filled with minerals had the worth of 6.850, 2.388 and 2.324 billion$ correspondingly.

The trade between two nations is not limited and revolved around the import and export of the technological & non-technological products but it’s above on the exceptions. The exchange of experts, business, technical and educational services are also the part of nurtured trade relations. Apart from the mutual understating, the concerns on different trade matters and exchanges of professionals from both sides were never dying down. It was time, owing to high unemployment of professionals in India and Indian government raised its serious concerns regarding the lack of professionals in its own country because professional’s inclinations towards the United States were more than its own country. The visa restricted regime further bolster strained relations of two nations.

The Trump administration visa restrictions and harsh as well as unsympathetic laws related to immigration made more hurdles for the Indian professionals who wanted to settle down in the United States. In addition, the growth of country in the context of economy is based on versatile and many-sided variables and decisions of policy makers. The most important can be considered is FDI. The unbelievable growth of in the circle of FDI is noticed in the relations of India and the US which cement their relation more reliable and full of trust. According to the facts of India’s ministry of commerce & Industry (IMCI)”, the worth of FDI of the United States in its Asian sub-continent associate India was almost nine billion$. At the present, the office of the United States Trade representative (USTR)” is sharing facts about the links between two countries in the context of goods as well as services.

The following table  explains  the trade of “GOODS” among two nations in the context of import/export:

 Source: https://www.census.gov/foreign-trade/balance/c5330.html (accessed on June 28, 2021).

Along with strategic convergence, both countries consider each other as reliable partners not only in strategic and security convergences but also in the domain of economic and trade. The trade ties is Consequential for the Asian sub-continent country India. In the year of 2018, America was the 2^nd principal export market for India with the shares of 16% after European Union 17.8% shares and ranked itself in goods import shares 6.3% after China 14.6% and European Union 10.2%. The FDI is small but rapid emergent trade in defense is significant part of trade realm. The trade in civil nuclear is likely to stalled owing to the “liabilities” acts and protections in India. The trade in the context of bilateralism in the realm of goods and services is about 3% of American World Trade. India enlisted its name on the rank of 12^th number in the list of exporting countries of United States.

Moreover, the apex category of exports were precious & prized stones, metals including diamonds, fuels, aircrafts, machineries, and the chemicals related to organic with the value of 7.9$, 6.7$, 2.9$, 2.2$ and 1.6$ in billion respectively. In the circle of agriculture related services and all other goods export form US to India category including cotton, fruits, products related to dairy and lastly prepared meals & trees of nuts with the worth of 333$, 163$, 48$, 33$ and 663$ in billions in that order. The above mentioned category was the top listed product which was export by the United States to India. The product list which is mainly imported by the United States form India including metals plus diamonds, products related to pharmacy, machines, minerals fully based fuel and lastly automobile with the value of 11$, 6.3$, 3.3$, 3.2$ and 2.8$ billions correspondingly. In the calculation of agriculture goods the main products which were import by the US from its associate India including spices, Indian Rice, oils, fruits, Indian habitant vegetables and oils of vegetables with the value of 261$, 216$, 193$, 141$, 127$ in millions.

Not only the good and services are playing their role to boost up the trade relations but the multinational global companies e.g. Microsoft, Apple, Dell IBM and Oracle are doing investments in the worth of millions as well as billions in India and share their vital role to bolster the India’s economy. In the automobiles industry, India can now assembled the United States cars after spreading the American investment and formulation of productions houses in India. According to the Whitehouse report in the year of 2009, Indian based company titled “TATA” was the top listed company which is busy to do huge investment in the United States.

The growth of Indian FDI was high with the ratio of 3.7 percent in the year of 2015 as compared to year of 2014. The convergence and divergences are all the part of states relationships and in the case of India and the US, the one side of the coin explain the subterranean trade ties between two nations but the other side of the coin shows some sort of hurdles and concerns in the friendship of two democracies in the economy. The most importantly, the fully access and accommodation as well as adjustment of India in the United States “Generalized System of preference Program (GSP)”, the “Intellectual Rights (IR)” and readiness issue of a complete access to the United States to India are hindered concerns. The main trouble titled “Bilateral Investment Treaty (BIT)” and trouble’s ramifications on Indian trade ties with the US. It is totally in the favor of Indian economic interests to bring the USA on the table of “BIT” as an induction initiative for “Free Trade Agreement (FTA)”.

In the year of 2009, owing to the efforts of deep pressure of Indian lobby in America, the preliminary as well as prelude talks taken place but it was not acknowledgeable progress. Soon after the two years in 2011, the issue was again upsurge and made a debatable in forum title “US-India Trade Policy Forum (UITPF)” in the Washington. Under the umbrella of “UITPF” India surged the agenda of inauguration of partnership in economy titled “Economic Partnership” same like “strategic partnership” and strengthen the economic ties and divert the American non-diverted concentration towards India.

Owing to the wish of formulation of trade arrangements under the safe shelter of “Bilateralism”, India has fasten its eyes with the American programs named “Farm subsidy” which not only provide the direct accessibility of India’s agriculture segment but also expressively entrance in Americans farmers and their agriculture setups. Apart from this modest suspects, the road of mutual understanding become bumpier & rugged when the Indian government imposed the restraints in the milieu of “Sanitary & Phyto-Sanitary (SPS)” which highly condemn by American and articulate that this course of action cut off the direct accessibility of American people who are related to agriculture to Indian agriculture sector. Reciprocally, India’s government exceedingly rejects the American allegations and say with expressive manners that the USA farm subsidy emerges as impediment in the way of deep cordial agriculture cooperation and exchange of technology related to agriculture. These reciprocal arguments against each other create baleful situation for other investors and investments looms e.g. Wal-Mart. Indian government believed that the sooner or later but sure Wal-Mart will appear like tantamount challenge for India’s local market.

The theory of Realism of International Relations articulated that in the system the powerful countries will always dominate the all game as well as write down the all rules of games according to their own will and reciprocally the all weaker states are bound to bow their head aimed to follow the all rules which are formulated by powerful countries.  In the analogous above mentioned statement of realism, the United States wants to flow the India in the same vein of realism. With the aim to accelerate the efforts to making suitable environment for enlargement of ties in economy, the United States demands the mutual indulgent from India. Furthermore, by disregard the point of view of United States, India utterly dismays the expectations of America and handed outright subsidy to its own industry of “Power Plant” and its lead the frightening situation as well as restricted opportunities for American based business in India.

With the aim to remove all growing grievances and covert the misunderstanding into opportunities, the “US-India financial and trade partnership (USFTP)” held in the United States and both nations finally does patch up on central argument that truly implementation of economic as well as commercial juxtaposition with the thought of liberalization will give new potently support to trade relations. Under the truly implementation of liberalization umbrella, the quest of new reforms and other variables put pressure on the Whitehouse to give fond concessions to India because later than 1998, both nations were indulged in the term of grapple over the usage as well as trade of technology related to Dual-use. Finally, owing to the personal fond with India, the Bush team gave cavernous concessions to India and inaugurated the forum named “US-India High Technology Cooperation Group (HTCG)”. Under the “HTCG”, India could get highly reward/benefits from the American based high-technology. Additionally, under the umbrella of NSSP, America does some modification in the policies related to its own export licenses domains to assist India.

As the result of this modification the elongated gateway open for “Indian Space Research Organization (ISRO)” and removal from all related entity lists. For cemented the cooperation in trade & investment, Indian based defense as well as space technologies companies are removed from list of entities. Under the leadership of Modi and his visit to the united states in the year of 2014, the “India-US investment initiative (IUII)” was inaugurated aimed to facilitate in investment, make Indian infrastructure superior with the collaboration of United States and rapid growth in FDI. Under the umbrella of “Commercial, investment and trade partnership” the following forum builds to prompted trade relations with mutual trust and reliability: the very first forum which was formulated was “Trade Policy Forum” and the main purpose of this to crack down the issues of intellectual property rights IPR, services regarding manufacturing exchange and in the domain of agriculture.

The second forum is “US-India CEO forum” and aim behind the formation of this to build up trust between the CEO of the companies of both nations to framed bilateral trust between government and as well as private companies. The meeting of CEO forum was held in the year of September, 2015 and the date was 21^st of the month. Along with CEO-forum, the commercial dialogue was commenced on the annual basis on the date of 12, august 2015 to promote the government-led investments. The trade ties between two nations beyond the Modi’s visit cemented more trustful agreements and forums in trade, goods & services. The very interesting forum is launch titled “An innovation forum” by both countries to do analysis of going government-led as well as private-led projects and give valuable feedback about these projects. Most importantly, this forum would use as tool of introduce new innovative ideas regarding boost up trade & investment. In addition, one more step which is taken by both nations is “cluster mapping”. The purpose of this is to make potent integration of Indian supply chain with globe and highlight or may be identify the all markets of India to United States. The main reason behind this highlighting the markets of India to construct desirability for American based companies in order to do investments.

This course of actions would not only push the growth of FDI but also enhance bilateral tie sin trade and developments. Moreover, the meeting has decided that the “National institute of standards and Technology’s manufacturing Extension Partnership (NIST-MEP)” under the safe shelter of commerce department of United States will contribute its innovative ideas in the domain of manufacturing and the supply chain. The idea of flourishing the “Bilateral Investment Treaty (BIT)” is also the part of meeting aim to pampering the economic ties of two nations. The Indian lobby in the America and political pundits play their vital role for the potential growth in the economic integration domain.

Additionally, the strategic pressure especially form the big giants (investors) from the United States and the international finance based organizations e.g. WB, IMF and WTO put pressure behind the integration of economic ties of two democracies. Owing to the Indian’s largest economy, large population and having approximately one hundred and thirty billionaires “(according X & UBS billionaire Censes Report of the year of 2013)”, India is gorgeous eye-catching country for investors of the rest of the world including America. Despite of the elevated beneficiary in the year of 2018 in “Generalized System of Preferences (GSP)” with the value of 6.3$ billions and duty free goods, Trump administration terminate Indian eligibility for the “GSP” which was affective on sixth month of the year of 2019 and the date was  5^th of the month. In addition, the visa restrictions and Trump visa policies is the issue for Indians investors, workers and businessman especially the category of “H-1B” visa for specialized workers.

The complex and different notions of two counties on another important issue “Intellectual Property” is also debatable that how can both countries do balance in the context of IP and protect and support goods particularly in the realm of pharmacy and medicine. In the sphere of defense, since the year of 2008 both nations do multiple contracts with the worth of from fifteen billion$ to five hundred million$ in the previous years. The “MH-60” helicopters, “AH-64” Apache Helicopters are the breakthrough in defense cooperation with the worth of approximately two and half billion$ and nine hundred and thirty millions$ with aim to sharing of more technology and co-production.

The Indian deal of Russian oriented defense system “S-400” may be grafted two nations towards modest estrangement in the domain of defense trade and trigger sanctions on India under the Sanctions Act of “P.L. 115-44”. As well, Indian watchers are giving highly support to “Free Trade Agreement (FTA)” and the willingness of Indian government open of its market. The CEO forum is playing its vital role in private-led engagement for removal of friction in trade notions of both sides. In the framework of regional integration, Indian government has showed its willingness to become the part of “Asia-Pacific Economic Cooperation (APEC)” which is comprised with United States with China and nineteen (19) other countries and trump stated that we encourage India in this stance.

Despite of frictions during last Trump era, there is immense prospect of augmentations of economic ties of two countries in Biden era. As both nations India and USA have decided to increase their bilateral relations and to improve the economic cooperation.

Author: Rana Danish Nisar  –  PhD (International Relations) Student at the School of Politics and International Studies (SPIS). He holds Mphil in (International Relations), Masters in (Pakistan Studies), and Masters in (International Relations) degrees. He won acceptance Harvard Project for Asian and International Relations HPAIR (USA), 2017.  His research interests are broadly in South Asian Affairs, South Asia Geo-Politics, India-Pakistan Relations, South Asian Nuclear Politics, US and South Asia, Indian Ocean, Security studies, South Asian developments studies.

(The views expressed in this article belong  only to the author and do not necessarily reflect the views of World Geostrategic Insights). 

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