Deepening Indo-US Trade and Investment Ties

17 Nov 2020

The elections in the United States of America in November resulted in Mr Joseph Biden being elected the 46th President, with Ms Kamala Harris elected as the Vice President. The Indo-US partnership enjoys wide support in the US and can expected to be taken forward with renewed focus in the new Administration.  

Bilateral Trade

India-US trade and investment relations have made significant strides over the past few decades and was growing steadily prior to the global economic slowdown, before the onset of the Covid-19 pandemic. 

US is one of the few countries with which India has maintained a constant trade surplus. During 2019-20, the US was India’s largest trading partner and remained one of the foremost export destinations for India. Total trade between the two countries stood at US$ 88.91 billion during 2019-20. 

India-US Bilateral Trade: Last 5 Years

(US$ Billion) 2015-16 2016-17 2017-18 2018-19 2019-20
Export 40.34 42.21 47.88 52.41 53.09
Import 21.78 22.31 26.61 35.55 35.82
Total Trade 62.12 64.52 74.49 87.96 88.91
Trade Balance 18.55 19.90 21.27 16.86 17.27

Source: Export Import Bank, Department of Commerce

Between 2015 and 2020, Indian exports to the US increased from around US$ 40 billion to US$ 53 billion, growing at a compound annual growth rate (CAGR) of 5.65%. 

Indian imports on the other hand grew from US$ 22 billion in 2015 to US$ 36 billion in 2020, recording a CAGR of more than 10%. 

India’s exports to the US as a share of its total exports was estimated at around 17% during 2020, while the share of US imports in India’s total, during the same period stood at around 7.5%.

Total trade between the two partners grew significantly over the five-year period between 2015 and 2020, increasing from US$ 62 billion in 2015 to around US$ 89 billion in 2020, registering a CAGR of 7.43%. 

India has maintained a consistent trade surplus with the US over the last five years, which grew from US$ 18.5 billion in 2015-16 to US$ 21.3 billion in 2017-18 and moderated at US$ 17.3 billion in 2019-20. 

According to US data, total trade in goods and services reached a peak of US$ 146 billion in 2019. The US in fact, accounts for half of India’s key exports of IT/ITeS.

Bilateral Investment

India-US investment ties have significantly expanded over the years, with many US companies currently investing in and sourcing from India and many Indo-US joint ventures operating in India. 

As per Department for Promotion of Industry and Internal Trade (DPIIT), the US is the fifth largest investing country in India in terms of Foreign Direct Investments (FDI) equity inflows. Between April 2000 and June 2020, cumulative FDI equity inflows to India from the US stood at US$ 30.42 billion, accounting for 6% total inflows.  

Many Indian companies are also investing heavily in the US and adding value. A CII study released in 2020 titled “Indian Roots, American Soil: A survey of Indian Companies’ investments and operations in the United States”, found that the total value of tangible investments made by 155 Indian companies in the US exceeds US$ 22 billion, with 77% of these companies planning to make more investments in the US. 

Looking Ahead

There is significant untapped potential between India and the US and greater engagement between the two countries can boost bilateral ties and help achieve the mutually agreed trade target of US$ 500 billion. 

CII anticipates deepening industry cooperation in new age businesses, disruptive innovations and future technologies. 

Bilateral cooperation in pharmaceuticals, biotechnology and healthcare will continue to be a top priority. Agreement on medical equipment, medical devices, therapeutics will be key to boosting industry cooperation towards the abatement of the pandemic. 

Manufacturing capabilities will need to be strengthened in both countries, and the role of technology aided by Robotics and Artificial Intelligence will take center-stage. 

“Green Tech” and sustainable financing for green infrastructure is an area of good potential.  The US Government is also promoting clean coal technologies and new applications of coal generated from existing thermal plants where India can collaborate.

Tourism and hospitality sector, which has suffered immensely will also need a boost, and both countries will need to think of safe and sustainable travel protocols. 

The India-US trade deal was under negotiation and would be beneficial for businesses. Hopefully, the discussions would step up under the new Government.

Certain other areas such as skilled worker visas and SME cooperation would also help build the confidence of industry of both sides. 

Indian industry looks forward to playing its role in building a comprehensive economic partnership with the US.

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