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The United States is India's largest trading partner. India accounts for just one per cent of US trade. It is believed that India and the United States will double bilateral trade in three years by reducing trade and investment barriers and expand cooperation in agriculture. An analysis of the trading pattern and what lies ahead.
Economic Reforms introduced since 1991 have fundamentally changed the course of the Indian economy and led to improved growth rates, higher investment and trade flows. The outcomes of these reforms on trade and investment relations with the US have been thoughtful. Though, the trade between the United States and India is relatively small, it has risen sharply over the years. In terms of India's major trading partner, USA continues to lead. However, India's share in US trade is 24th in US export and 18th in US imports. The two countries have been making efforts to strengthen institutional structure of bilateral economic relations. An estimated 80 per cent of Indians live on less than $2 (Rs 90) a day, but India's middle class has swelled to more than 300 million - a number larger than the entire U.S. population -makes it a potentially large market for US goods and services. An exploding economy has created millions of jobs. The country's outsourcing industry alone is expected to bring in $22 billion in revenue this fiscal year, much of that generated by US companies. In an effort to facilitate increased trade and investment flows between India and the US, recently the two countries have agreed to establish focus groups on agriculture tariff and non-tariff barriers, services, investment, innovation and creativity. It is also believed that both New Delhi and Washington - who agreed to work together in completing the WTO Doha Development Agenda before the 2006 end - will increase contact on various issues including tariff and non-tariff barriers to trade in goods and services, and preventing the illicit use of the financial system. Also during the recent visit of President George W. Bush to India, Indian Prime Minister along with the President highlighted the launching of the United States-India Agricultural Knowledge Initiative with a three-year financial commitment to link the two countries' universities, technical institutions, and businesses to support agriculture education, joint research, and capacity building projects including in the area of biotechnology. India's main exports to US are precious stones, metals (worked diamonds & gold jewellery), woven apparel, knit apparel, miscellaneous textile article, fish and seafood (frozen shrimp), textile floor coverings, iron/steel products and machinery (taps, valves, transmission shafts, gears and pistons). India imports sophisticated machinery (computers and components, gas turbines, telecom, etc), electrical machinery, medical and surgical equipment/instruments, aircraft, spacecraft (small aircraft), metals, organic chemicals, plastic, cotton and cotton waste and wood pulp, etc. On investment front, US covers almost every sector in India, which is open for private participants. Both government-to-government level and business-to-business level conduct regular interactions with each other to promote and strengthen the trade and economic interactions between the two countries. The US investor community is today increasingly sharing confidence in the future of the Indian economy. Several areas like infrastructure, IT, telecom sector, energy and other knowledge industries such as pharmaceuticals and biotechnology, possess immense potential for progressing economic cooperation between India and the US. A very important aspect of US India economic relations comes with the emergence of Business Process Outsourcing (BPO), where in many US companies are reaping the advantages offered by India's IT sector. India offers a large pool of trained, English speaking personnel, which offers huge cost benefits to the US MNCs. However, a number of factors continue to hamper economic ties between the two countries. US criticises India for maintaining high tariff rates on imports (especially on products that compete with domestic products), and levying high surcharges and taxes on a variety of imports and imposing non-tariff barriers on US exports to India. In order to capture more US investment and trade share, India is required to further relax its trade and investment regimes, accelerate privatisation of state firms, cut down on corruption, and substantially boost spending on its in physical and human infrastructure. For this significant steps are required to eliminate government deficits and the high level of public debt that severely hamper the ability of the government to boost spending for needed infrastructure projects.
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