India-US: Allies with robust financial ties

India and the US are pure allies with shared values when it comes to their political ideology primarily based on democratic rules, India being the world’s largest and the US being its oldest practical democracy. The 2 even have truthful, equitable and impartial judiciary techniques that depend on rules of non-discrimination on the grounds of area and faith.

This makes India and the US mutually reliable strategic companions at numerous worldwide boards regardless of a number of variations primarily resulting from their divergent nationwide pursuits.

Since 2013-14, the US has constantly been India’s prime export vacation spot. In 2021-22, the US, with $76 billion, accounted for over 18 per cent of India’s complete exports – a lot forward of the United Arab Emirates (UAE), $28 billion (6.6 per cent), and China, $21 billion (3.8 per cent). Throughout April-November 2022, India’s exports to the US grew at 8.3 per cent to $53 billion from $50 billion in April-November 2021, whereas its exports to China declined by 36.8 per cent throughout the identical interval.

The US can also be the most important FDI investor in India when it comes to fairness, as per the Reserve Financial institution of India’s (RBI’s) newest FDI knowledge, with Rs 8.1 crore, accounting for 16.9 per cent share in 2022.

The US accounted for the very best inward remittances with a share of 23.4 per cent to India, as per the RBI, forsaking the UAE with a share of 18 per cent in 2021. As India stays the world’s prime recipient of overseas inward remittances, that are anticipated to the touch $100 billion in 2022, the transformational shift to the US from the Gulf nations reveals the rise of India’s high-skilled manpower.

India upbeat on commerce coverage reforms

India’s rising financial resilience in recent times and its stellar financial efficiency because the world’s quickest rising massive financial system at 6.9 per cent amidst international financial woes has reworked it right into a strategically important nation within the comity of countries. The post-Covid disruptions of worldwide provide chains and the current financial slowdown in China emanating from its zero-Covid coverage and bilateral US-China tensions over Taiwan necessitated the US to discover various markets for its items, nations for sourcing its import necessities and funding locations for its corporations to develop internationally.

Given the scale of its home market and demographic dividend, India is poised to emerge because the dominant financial superpower within the coming years. Whereas negotiating with US Commerce Consultant Katherine Tai on the forthcoming India-US Commerce Coverage Discussion board (TPF), Indian Commerce Minister Piyush Goyal appears upbeat concerning the nation’s rising financial resilience and transformational coverage measures and institutional mechanism to spice up exports with an unprecedented 45 per cent development over the earlier 12 months, taking India’s exports to a file stage of $422 billion in 2021-22. The India-US TPF, the main bilateral institutional mechanism to debate and resolve points associated to commerce and funding, is scheduled for January 11 in Washington.

Key points for bilateral negotiations

The US negotiators are extraordinarily involved about their burgeoning imports and commerce deficit, which went up from $798 billion in 2016 to $1.2 trillion in 2021.

Certainly, the overall US exports grew from $1.547 trillion in 2017 at 1 per cent to $1.753 trillion in 2021, whereas its imports quickly rose at 3 per cent from $2.406 trillion to $2.937 trillion throughout the identical interval.

Subsequently, American negotiators, of their relentless campaign to penetrate world markets, aren’t solely persuading nations, particularly rising economies, to open up but additionally to scale back import duties, if not present duty-free entry to US items.

The US commerce deficit with India grew considerably from $24.9 billion in 2017 to $36.9 billion in 2022, sending American negotiators searching for methods to penetrate the Indian market. India constantly has a constructive commerce stability with the US – throughout April-November 2022, it was $19 billion.

The US had commerce deficit with India in 2021 for medicaments ($8.5 billion), polished diamonds ($5.7 billion), jewelry ($3.2 billion), petroleum merchandise ($3 billion), bedsheets and linens ($2.7 billion), crustaceans and different marine merchandise ($2.7 billion), motor automobiles ($1.4 billion), treasured and semi-precious stones ($988 million) and many others, whereas it has commerce surplus in supplying crude petroleum ($9.5 billion), petroleum fuel ($1.8 billion), coal ($1.3 billion), gold jewelry ($1.3 billion), nuts ($908 million), acrylic hydrocarbon ($822 million) and many others.

India is the world’s largest importer of almonds with a 59 per cent share, and the US is its largest provider, accounting for 87 per cent share at $749 million in 2021. In addition to this, there are non-agricultural gadgets reminiscent of saturated acyclic hydrocarbons value $591 million (84 per cent share) and denatured ethyl alcohol value $276 million (88 per cent share).

The declining industrial exercise within the US – as revealed by the deteriorating Manufacturing Buy Managers’ Index (PMI), from 57.5 in Could 2022 to 46.2 in December 2022 – vis-a-vis India’s strong PMI development from 54.6 to 57.8 throughout the identical interval is a matter of rising concern amongst American policymakers and negotiators.

The US is extraordinarily eager to develop its market in India, particularly for its agricultural merchandise, reminiscent of dairy, apples, walnuts, spirits and alcoholic drinks, moreover manufactured and technology-intensive items reminiscent of defence tools, aircrafts, vehicles and providers.

Furthermore, India’s service sector has proven a major rebound as India’s Providers PMI rose to 58.5 in December 2022 from 56.4 within the earlier month, whereas the US Providers PMI declined considerably to 44.7. Apparently, even in providers commerce, India’s commerce surplus has constantly grown from $5.9 billion in 2019 to $10.3 billion in 2021. Even within the third quarter of 2022, India has a substantial surplus of $1.9 billion, which is of concern to American negotiators.

The US is eager on getting India to additional liberalise its marketplace for its providers sector in training, insurance coverage, banking and non-banking monetary providers, technically generally known as ‘industrial presence’, Mode II underneath the GATS settlement, and digital commerce and funds underneath Mode I. India, in the meantime, wants to guard its home pursuits and discover methods to ease the motion of its professionals to the US underneath mode IV of GATS.

The ever evolving non-tariff obstacles by the US, reminiscent of high quality restrictions, atmosphere, local weather change, baby and patent necessities, have lengthy been a difficulty of concern, restraining the move of Indian items reminiscent of dairy and meals merchandise, moreover others. Reinstating GSP (Generalised System of Preferences) advantages to India and revocation of the 25 per cent and 10 per cent duties imposed on sure metal and aluminium merchandise, a matter already underneath WTO, are among the many points the US ought to contemplate. American negotiators must be delicate to India’s floor realities and recognise its resurgence as the worldwide financial powerhouse, and curtail obstructions to grasp the total potential of bilateral commerce.

The writer is Professor, Indian Institute of Overseas Commerce, New Delhi, and Director, Indian Institute of Plantation Administration, Bengaluru