With the debates emanating out of the recent US decision on Generalized System of Preferences (GSP), India-US relations are back in the news. In a transactional world, the larger setting of geostrategic choices for sectoral policy domains like trade and other sectors is leveraged for balancing the wider objectives. Since the US is on a collision course in trade and market access with China and its transatlantic partners, it is probably attempting to draw a new norm for deficit-free trade.
The dynamics of trade between the two partner countries should be viewed at a granular level as trade in a specific sector and particularly in high-technology goods has multiplied. Overall trade between them has expanded from $4.5 billion in 2008 to $73.4 billion in 2017. Foreign direct investment (FDI) has also multiplied. The flow of US FDI in India (stock) was $45 billion in 2017, a 15% increase from 2016. This is largely in the manufacturing sector and scientific and technical services. The flow of Indian FDI in US (stock) also went up in 2017 at $10 billion, an over 10% increase from 2016.
At the sectoral level, the expansion in trade is all the more impressive. In primary commodities, the trade has expanded from $17 billion to $49 billion with major jump in exports of fish and aquaculture, coffee, spices etc., oilseeds and meat. The most impressive rise has been in fish, crustaceans and molluscs with their share coming close to 5% in India’s total exports and in value terms touching close to $2 billion. A similar increase was evident in ores and minerals with exports touching $2.7 billion. Among the manufactured items, pharmaceuticals impressed the most with exports expanding from $1.5 billion to $6.2 billion, occupying almost 13% of total exports. Machinery and equipment exports remained almost static at $2.63 billion. The exports story from the US is equally interesting at the sectoral level with exports of primary commodities expanding from $391 million in 2008 to $1.4 billion in 2017. This sharp rise was led by commodities such as fruits and nuts (which rose from $200 million to $843 million) and sugar and sugar confectionary, meat and fish, cocoa and cocoa preparations, beverages and spirits. A major expansion is in fuel and mineral oils, which increased from $ 884 million to $ 2.8 billion. Even the exports of pharma products jumped from $87mn in 2008 to $340 million in 2017.
In the manufacturing sector, exports of organic chemicals, plastic articles, rubber and rubber-based products, pulp of wood and fibrous material expanded to a great extent. The most impressive here is natural pearls and jewellery which grew from $2.5 billion to $7 billion in the same period.
Vehicles have also gained greater market access in India. The optimal and photographic items have also multiplied, reaching the $3.1 billion level.
As we discussed, the data and trends are clear as to how bilateral trade and investment linkages have organically evolved and are growing steadily with little state intervention. The gravitas of the bilateral relationship was recently also evident with foreign secretary Vijay Gokhale’s meeting with US secretary of state Mike Pompeo at the 9th Round of the India-US Strategic Security Dialogue held in Washington DC on 11 March.
In the Indo-Pacific context and also in the context of new choices at the multilateral fora, a closer India-US partnership would be in wider global interest. Therefore, necessary efforts at all levels are required to deepen it further.
Sachin Chaturvedi is director general at the Research and Information System for Developing Countries. The views expressed are personal.