India enjoys a long-standing partnership with the US, based on common principles of democracy and shared interests of promoting peace and economic prosperity through trade and investment ties. The bilateral relationship between the two countries that received an impetus starting with the visit of President Clinton in 2000 has strengthened over the years and continues to gather momentum under President Trump.
The forthcoming visit of Prime Minister Modi to US during September 2019 will further catalyze economic ties between the two countries and is a great opportunity for reinforcing this strategic partnership.
The US surpassed China to become India’s top trading partner in 2018, while India was its 9th largest trading partner. Total trade between the two countries during 2018-19 stood at around US$ 88 billion, of which India’s exports to the US amounted to US$ 52 billion and India’s imports from US amounted to around US$ 36 billion.
(in US$ Millions)
Source: Export-Import Databank, Ministry of Commerce and Industry, Government of India
Major Indian exports to the United States comprise of pharmaceutical products, textiles, diamonds, organic chemicals, and electrical machinery among others. On the other hand, major imports from the US to India include electrical machinery and equipment, aircraft and parts, petroleum products, plastic and articles, and iron and steel products, among others.
Bilateral trade in services between the two countries has increased rapidly over the last two decades. Total trade in services between India and US stood at around US$ 54.56 billion in 2018 as compared to US$ 51.9 billion in 2017. Of this, services imports into India from US was estimated at US$ 25.8 billion while Indian services exports to US totaled US$ 28.8 billion.
Both countries are involved in a number of projects and bilateral investments, as part of their multifaceted partnership.
The US is the sixth largest source of foreign direct investment (FDI) to India. Cumulative FDI inflows to India from the US for the period 2000-2019 stood at around US$ 27 billion, constituting more than 6% of total FDI inflows to India. U.S. direct investment in India is led by professional, scientific, and technical services, manufacturing, and wholesale trade.
As per the 2017 CII report, “Indian Roots, American Soil”, based on a survey of 100 Indian companies across 50 states in the US, Indian investment to US is estimated at around US$18 billion. India’s direct investment in the U.S. is led by professional, scientific, and technical services, manufacturing, and depository institutions.
As per US data sources, cumulative US FDI to India as of 2018 amounted to US$ 45.98 billion while Indian FDI to US for the same year is estimated at around US$ 13.73 billion.
Sectors of Opportunity
Some of the sectors of opportunities which can mutually benefit both countries are in the areas of energy and infrastructure, media and entertainment, defense and aerospace, and healthcare, among others.
Energy: Both countries have a long-standing strategic partnership in the energy sector. India offers one of the largest investment opportunities in the renewable energy space with 175 gigawatts capacity planned till 2022. Potential sectors of collaboration could be in the areas of oil and gas, power, renewable energy and coal, as also India’s unconventional hydrocarbons sector and area of fracking of shale gas.
Infrastructure: India could benefit from US participation in developing smart cities while India can help US companies launch and expand businesses in India, focusing on technologies, systems and services in the safety and security, intelligent transportation, water, wastewater, and power sectors.
Defense and aerospace: While US companies stand to gain from India’s plan of reviving airport infrastructure through public-private partnerships, collaboration between the two in the areas of drone technology and manufacturing can also mutually benefit both countries. The defense manufacturing companies in the US could leverage India’s upcoming defence production corridors and the growing strength of Indian companies for joint production collaborations.
Healthcare: Substantial opportunities exist for technology transfer in the areas of healthcare, with Indian programs such as Ayushman Bharat significantly boosting the demand for innovative and technology-based models. Other sectors of opportunity include medical infrastructure, research, and skill development, among others.
Media and entertainment: The media and entertainment sector also offers many opportunities for collaboration, bolstered by the strong presence of Indian diaspora and greater interest in Indian cinema across the world. VFX/animation, audio-visual co-production, gaming and virtual reality, and digital services are some areas that present huge opportunities for both countries.
The meeting between PM Modi and President Trump is expected to prioritise trade and investment talks that could lead to exciting prospects and further bolster the strong relationship between the two countries.