Indo-US ties: Economics & Strategy

Indian Prime Minister heads to the United States for an official state visit on the invitation of American President.

Economic engagement

• The value of trade between the two countries has touched a record $191 billion, making the US India’s largest trading partner.
• For the US, India is the ninth largest trading partner.

• American companies have invested around $60 billion in India in sectors ranging from manufacturing to telecommunications and consumer goods to aerospace.
• Indian companies have put in more than $40 billion in sectors such as IT, pharmaceuticals, and green energy.
• Air India announced the purchase of more than 200 Boeing aircraft

Strategic underpinnings

• Quadrilateral Security Dialogue:
  • The flagbearer of the strategic engagement is the Quadrilateral Security Dialogue.
  • The Quad began as a broad partnership after the 2004 Indian Ocean tsunami.
  • It gained strategic heft after the four-country grouping, which has Australia and Japan alongside India and the US, was repurposed in 2017, primarily as a counter to China’s growing influence in the Indian Ocean rim, and as a forum for redoubling focus on the Indo-Pacific region.
• The I2U2:
  • The I2U2, a grouping of India, Israel, the US and the United Arab Emirates, is focused on joint investments and new initiatives in water, energy, transportation, space, health, and food security.
• Critical and Emerging Technologies:
  • India and US launched a new US-India initiative on Critical and Emerging Technologies.
  • The two countries established a partnership to make the semiconductor supply chain more resilient through private sector cooperation.

• Defence sector:
  • Cooperation in areas such as armoured vehicles, ammunition, and air combat could include a deal for India, the world’s largest arms importer, to manufacture under licence GE’s F414 turbofan jet engine to power the indigenous Tejas Mk2 light combat aircraft that is under development.

Problem areas:

• The US still has significant export controls on India (instituted after the 1998 nuclear test), which inhibits the free transfer of technology.
• Among the outstanding trade issues that require resolution are visa delays and the revoking of India’s trade benefits under the Generalised System of Preferences (GSP) programme in 2019.
• The US has complained about India’s trade policy being overly protectionist, especially with regard to entry barriers for foreign investment and unsteady legal rules.
• India has been raising tariffs over the last few years, reversing an earlier policy of lowering tariffs that endured for decades.
• New Delhi will likely be nudged to join the trade pillar of the US-led Indo-Pacific Economic Framework (IPEF).
  • From Washington’s perspective, there is no political appetite for a full-scale free trade agreement (FTA), and it sees the IPEF as a more practical substitute for bilateral deals.
  • India has signed up for three pillars of the IPEF:
    • committed to building more resilient supply chains,
    • tapping clean energy opportunities, and
    • combating corruption
  • It has opted out of the fourth pillar (trade) citing reservations about the commitments required on environment, labour, digital trade, and public procurement.

• There is growing disquiet within sections of the Union government over India not finding an entry into the Minerals Security Partnership (MSP), a US-led partnership to secure supply chains of critical minerals.
  • It is aimed at reducing dependency on China.
  • The partnership has now been expanded to include a new member, Italy (along with the 11 founding countries and the European Union)