India-US bilateral relations have developed into a “Global Strategic Partnership“, based on shared democratic values and increasing convergence of interests on bilateral, regional and global issues. The emphasis placed by the Government in India on development and good governance has created an opportunity to reinvigorate bilateral ties and enhance cooperation between two nations. Trade has always been a cornerstone of connectivity between nations around the world. Nations must strengthen their ties and uphold multilateralism and the rules-based free trade system. Without a doubt, India and the USA, two of the largest markets in the world, need each other and trade between them is desirable. The total estimated hidden potential revenue of US$500 billion is comprised of imports and exports between the US and India. Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The growing purchasing power and the rising influence of social media have enabled Indian consumers to splurge on good things.
India’s key strengths are its large domestic market, its young and growing population, a strong private sector with experience in market institutions, and a well-developed legal and financial system. Also, from the perspective of the knowledge economy, another source of strength is a large critical mass of highly trained English-speaking engineers, business people, scientists, and other professionals, who have been the dynamo behind the growth of the high-value service sector.
Knowledge transfer processes as part of a holistic knowledge management approach were essential for the success of these off-shoring activities. Technological learning and innovation are essential for economic growth and development and are major determinants of long-term improvements in income and living standards. While in the more advanced economies technological progress involves the generation of new knowledge that can be applied to productive activity, for developing countries technological progress is strongly influenced by their ability to access, adapt and diffuse technological knowledge that has been generated abroad. Economic interaction between India and the US occurs through trade, financial flows, including foreign direct investment (FDI), and the movement of workers, managers, professionals, and academics. Such interaction enhances the bilateral trade, investment and serves as a conduit for the transfer of technology.
Regular exchange of high-level visits has provided sustained momentum to bilateral cooperation, while the wide-ranging and ever-expanding dialogue architecture has established a long-term framework for India-U.S. engagement. Today, the India-U.S. bilateral cooperation is broad-based and multi-sectoral, covering trade and investment, defense and security, education, science and technology, cybersecurity, high-technology, civil nuclear energy, space technology and applications, clean energy, environment, agriculture, and health. Vibrant people-to-people interaction and support across the political spectrum in both countries nurture our bilateral relationship. The current period of economic uncertainty and budgetary austerity is testing our ability to strengthen investment in human resources and foster high-quality human capital, without which we risk both innovation and growth.
Strategic talent mobility practices between India & the US can effectively boost labor supply, stimulate labor productivity – all of which lead to sustainable economic growth. Thus, the Indo – US relationship can exploit its hidden potential.
- Five Pillars of the Strategic Partnership
- Strategic Issues
- Energy and Climate Change
- Science and Technology
- Health and Innovation
Education and Development:
Indian IT companies contributed US$57.2 billion to the GDP of the US in 2017. India-based global IT services companies employ more than 175,000 workers in the US accounting for 8.4% of employment in the computer systems design and related services industry. State-to-state ties help Indian companies investing in the US and US companies who need support at the ground level in India.
India is taking steps to ensure that US investments into India are taken to new levels by ensuring profitability as well as protection of Intellectual Property. The fact that India has jumped 65 places in four years to reach 77th position on the World Bank’s Ease of Doing Business ranking and 52nd rank in the Global Innovation Index are just some of the global indices reflecting India’s emergence as a hub for innovation and manufacturing. Moreover, Make in India initiative enhances India is currently home to the world’s 4th largest auto industry and 3rd largest domestic civil aviation market.
- Total number of Non-Resident Indians (NRIs) – 1.28 million;
- Total number of Persons of Indian Origin (PIOs) – 3.18 million;
- U.S. Mission to India — Smart Cities Collaboration
India’s urban cities are expected to house 40% of the population and contribute 75% to the GDP by 2030. To reach this goal, cities need adequate infrastructure to improve the quality of life of the people and drive investment. The Government of India’s Smart Cities Mission aims to drive economic growth by enabling local development through technology. This project endeavors to empower India’s youth, entrepreneurial, and academic communities to generate practical solutions toward making their city smarter. This project will target the U.S. Trade and Development Agency (USTDA) sponsored Smart City Ajmer, Rajasthan.
The goal of this funding opportunity is to strengthen people-to-people ties between the U.S. and India through the exchange of information, experience, and expertise.
This project is expected to advance this goal by:
1) Empowering India’s youth, entrepreneurial, and academic communities to address challenges in their city;
2) Generating practical solutions toward making cities smarter by sharing U.S. best practices and expertise;
3) Supporting and strengthening the U.S.-India Smart Cities partnership.
India Strategic Energy Partnership with the US
The U.S. Department of Energy (DOE) and the Indian Department of Atomic Energy (DAE) are working toward signing two project annexes under a DOE-DAE implementing agreement. The project annexes aim to facilitate and promote cooperation on accelerator R&D and related sciences to further our understanding of fundamental physics. India and US plan to further strengthen their Strategic Energy Partnership that larger energy imports from the US by the world’s third-largest oil importer’ state-run firms such as Indian Oil Corporation Ltd. (IOCL). Petronet LNG Ltd may ink a deal with US liquefied natural gas (LNG) developer Tellurian Inc. for around US$2 billion in the proposed Driftwood project in Louisiana.
In a first, Indian Oil Corp., the country’s largest refiner, has also inked two-term contracts totaling 4.6 million tonnes (mt) of US crude oil for 2019-20. India is also sourcing liquified natural gas and oil from the US, with Indian firms investing US$4 billion in US shale gas assets.
ExxonMobil Corp., the world’s most valuable energy company, may shortly form a partnership with state-owned GAIL (India) Ltd to set up a green energy platform in India. The India-US Strategic Energy Partnership will further deepen the energy trade and investment relationship.
India, the biggest emitter of greenhouse gases after the US and China, has been pushing for a gas-based economy and plans to connect 10 million households to piped natural gas by 2020. India plans to reduce its carbon emissions by 33-35% from its 2005 levels by 2030. Increasing natural gas use will enable India to fuel its impressive economic growth to achieve the goal of a US$5 trillion economy while contributing to a cleaner environment.
Science and Technology Co-operation between US & India
Science and technology cooperation between the United States and India strengthens our bilateral relationship, promotes economic growth, and allows us to develop new and innovative technologies and products to address shared challenges. The United States and India believe that science, technology, and innovation are key tools that will help us address global challenges such as climate change, health, education, food, water, and energy security. Both countries support cutting edge research and are building public-private partnerships that promote science and technology-based innovation and entrepreneurship. The United States and India also recognize the importance of gender equality in the scientific workforce and have conducted numerous exchanges to encourage increased participation of women and girls in science. Over the past year, two bilateral endowments – the Indo-U.S. Science and Technology Forum (IUSSTF) and U.S.-India Science and Technology Endowment Fund – have provided roughly US$3 million to fund hundreds of exchange visits and support technology commercialization through U.S.-India joint ventures.
The U.S. and India continue to carry out and expand upon cooperation taking place under the U.S.-India Civil Space Joint Working Group (CSJWG). NASA and Indian Space Research Organization (ISRO) continue to make progress on the NASA-ISRO Synthetic Aperture Radar (NISAR) mission. NASA and ISRO have initiated a professional engineer and scientist exchange program. The United States and India also look forward to continued discussion regarding the development of India’s regional navigation satellite system in a manner that is compatible and interoperable with GPS.
USAID is prioritizing public-private alliances in densely populated urban areas for targeted investments in water and sanitation. The partnerships will work to reduce preventable morbidity and mortality among poor urban children and women through innovative solutions for improved water and sanitation practices and services. The first partnership will initially provide safe drinking water to approximately 31,250 households in slums across 25 wards in Bangalore, with the potential to scale significantly.
Partnership in Health and Innovation
U.S.-India cooperation in health, including India’s role as a co-convener of the Child Survival Call to Action. In support of the Child Survival Call to Action, USAID announced plans to partner with a leading Indian private sector management firm, bringing together the public and private sectors to scale up effective solutions to end preventable child and maternal deaths in India by 2035. The new partnership supports national-level policy development and implementation across 184 highly burdened Indian districts and strengthened service provision in up to 11 states with high rates of child and maternal deaths.
India and the United States plan to partner with other nations through the Global Health Security Agenda (GHSA) to accelerate progress toward a world safe and secure from infectious disease threats and to promote global health security as an international security priority.
The U.S. National Institutes of Health (NIH) has developed a robust relationship with India’s medical research community in the biomedical and behavioral health sciences. New and ongoing research partnerships focus on diabetes research, low-cost medical devices, and vaccine development. The Rotavac vaccine for rotavirus, developed through an innovative public-private partnership involving government, private sector, and academic partners, has entered the Indian market, where it has the potential to save the lives of thousands of children each year. The Department of Biotechnology within the Ministry of Science and Technology and NIH currently implements Indo-U.S. Collaborative Programs on Low-Cost Medical Devices, Vision Research, Brain Research, and Cancer Research. India and the United States share a concern about the emergence and spread of disease organisms resistant to medications from antimicrobial resistance (AMR).
The U.S. Department of Health and Human Services and Ministry of Health and Family Welfare (Centers for Disease Control and Prevention and the Indian Council of Medical Research) are finalizing a Memorandum of Understanding on Environmental and Occupational Health and Injury Prevention and Control. The MOU would develop further cooperation in research efforts, education and training and capacity-building activities, in several focus areas including public health aspects of household and ambient air pollution, water quality and access, exposures to hazardous substances, strengthening of laboratory capacity, road safety and burn injuries.
Build Blue Economy capacity
The United States and India both have extensive, economically robust coastlines: 42.1% of the U.S. population lives in a coastal county and 44% of the Indian population lives in a coastal state, island, or union territory. U.S. coastal counties generate 48% of the country’s GDP. India, for its part, is encouraging investment in its maritime sector through its India Maritime Plus initiative. Sharing lessons learned can contribute to environmentally friendly ideas for economic growth spurred by coastal communities.
The U.S. National Oceanic and Atmospheric Administration (NOAA), Indian National Centre for Ocean Information Services, and the Indian Ministry of Commerce and Industry should collaborate to develop Blue Economy web portals to systematically capture and publicize demographic and economic data on the coastal and ocean-driven industries in each country. Economists, oceanographers, and data scientists from each country could collaborate to share best practices in economic monitoring and data science, and consult with India’s extensive data management industry to serve as a resource for capacity-building in both countries. These Blue Economy data portals would benefit U.S. and Indian coastal communities by disseminating information and case studies related to sustainable economic development ideas. They could also elevate the voices in marine resource management policy of key coastal and ocean stakeholder groups such as those in fishing, shipping, recreation and tourism, offshore renewable energy, and ecosystem conservation.
Education and Development:
India has the potential to become an education destination and valued partner in cross-boundary research but would need to reform its educational institutions to do so. Steps to take could include the following two areas.
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Community Colleges: The two countries should continue and expand bilateral dialogues focused on the benefits of the community college model. India’s public system of Indian Institutes of Technology (IITs) and universities are struggling with the number of Indians that need access to higher education. Community colleges in the United States provide a significant amount of higher education to the American people and could be a useful model for India as it looks to fill the massive capacity gap in higher education that it faces in the coming years. Eventually, these dialogues could result in practical partnerships to help build India’s capacity to grow its higher education systems in the right ways. The United States should continue to fund and expand its Community College Administrator Program, which consists of one week of dialogue and five weeks of training for higher education administrators from India.
Ease Indian Education Regulations: One change that India could make is to ease foreign investment and visa restrictions so that American universities could establish joint research centers on Indian university campuses and American academic faculty could move more freely to India. The two countries should also work to harmonize their education systems to make sure that students receive credits when studying in the other country. While this is a complicated set of issues that only India can address, one of the main vehicles for boosting U.S.-India cooperation on higher education is to make the Indian higher education system more open and appealing to the U.S. students and institutions.
Indo–US Defence Partnership
India-US defense trade has increased from US$1 billion in 2008 to over US$18 billion today. Between 2013-17—largely coinciding with US arms exports to India saw a staggering increase of over 550%, making America, India’s second-largest arms supplier. As a result, India now operates the second-largest C-17 Globemaster and P-8 Poseidon fleets in the world.
Furthermore, the Defence Technology and Trade Initiative (DTTI) assumed the core of Indo-US defense trade relations. DTTI has effectively moved New Delhi and Washington from a traditional “buyer-seller” dynamic to one of co-production and co-development; this hones the potential of overcoming the supposed inconsistencies between ‘Make in India’ and ‘America First’ push to indigenization. For instance, with Tata Advanced Systems Limited (TASL), Boeing employs over 300 people at its Hyderabad co-production facility for the manufacture of fuselages of the AH-64 Apache helicopters. Indirectly, too, Boeing India employs over 1,200 and another 7,000 attached to its domestic supply chain partners.
Furthermore, TASL employs over 80 skilled personnel at India’s pioneering metal-to-metal bonding facility at Adibatla. In raising the tempo for technology transfers, India in 2018 also became just the third Asian country (after formal US treaty allies, Japan and South Korea) to receive clearance on purchasing license-free space and defense technology under the Strategic Trade Authorisation.
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U.S.-India Bilateral Trade and Investment
In 2018, India’s GDP was an estimated US$2.7 trillion (current market exchange rates); real GDP was up by an estimated 7.1%, and the population was 1.3 billion. U.S. goods and services trade with India totaled an estimated US$142.6 billion in 2018. Exports were US$58.7 billion; imports were $83.9 billion. The U.S. goods and services trade deficit with India was US$25.2 billion in 2018.
India is currently our 9th largest goods trading partner with US$87.9 billion in total (two way) goods trade during 2018. Goods exports totaled US$33.5 billion; goods imports totaled US$54.3 billion. The U.S. goods trade deficit with India was US$20.8 billion in 2018. Trade-in services with India (exports and imports) totaled an estimated US$54.8 billion in 2018. Services exports were US$25.2 billion; services imports were US$29.6 billion. The U.S. services trade deficit with India was US$4.4 billion in 2018.
FDI Flow from the USA to India
Foreign direct investment can play an important role in the development process of host economies. In addition to providing capital, employment and, in some cases involving local partners in established international value chains, FDI is a vehicle of technology and knowledge transfer, including for many soft technologies, such as managerial skills, marketing, or knowledge of standards and regulations in export markets. However, the success of FDI in any developing country is subject to the receptiveness of that country, which is defined by its economic and policy capacities and capabilities.
The US and India have established a close partnership based on their shared interest in free and fair trade. While the former is one of the world’s pre-eminent superpowers, the latter is the fast-rising ‘Tiger of Asia’. Both countries are focused on creating jobs, participating in fair trade, strengthening macroeconomic fundamentals, boosting industry and finding opportunities for collaboration.
The US is one of the most powerful economies in the world:
The US is the most technologically powerful economy in the world, with a per capita GDP of US$57,300. Although the dominance of US firms declined to some extent after World War II, they have since been at the forefront of technological advances, especially in the fields of computers, pharmaceuticals, medicine, aerospace, and military equipment.
Based on a comparison of gross domestic product (GDP) measured at purchasing power parity conversion rates conducted recently, the US economy ranked as the largest in the world for more than a century. However, it has been overtaken by China (which has more than tripled the US growth rate for each year of the past four decades) and has now slipped to the second place.
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US and India investment opportunities and synergies’, indicates that India-US bilateral relations have developed into a ‘global strategic partnership’ based on shared democratic values and increasing convergence of interests on bilateral, regional and global issues. The two superpowers—one an emerging tiger and the other an established giant—have shared a 70-year strong diplomatic relationship. Growth, trade and commercial linkages between India and the US form an important component of the multifaceted partnership between the two countries.
Both India and the USA have focused on creating jobs and strengthening trade and economic ties. These are encouraging signs and convey a desire to build upon and enhance bilateral trade. Both leaders also agreed to leverage their innovation skills and capabilities to solve global development challenges by collaborating in healthcare, space and oceans, and other areas of science and technology.
The Indian government relaxed FDI norms in several sectors like defense, telecom, and power exchange to boost business activity and trade flows, position India as a country where there is ease of doing business, bring best practices into sectors and allow investors to help grow the Indian economy. India remains one of the most attractive investment destinations due to its demographic dividends, largely middle class, an aspirational pool of young consumers, focus on streamlining business, etc.
Several opportunities exist for US and Indian companies to collaborate across sectors. By investing together, US and Indian companies can transfer best practices and knowledge, increase the quality and standard of goods and services, boost bilateral trade and, in doing so, create stronger and more competitive industries together.
Opportunities in Indo-US Farm Tech: Thought for food
Agriculture plays a significant role in the Indian economy. The sector provides a livelihood to more than 58% of the rural population in the country. Moreover, with 157.35million hectares of land, India holds the second-largest share of agricultural land in the world. Given the importance of the agriculture sector, the Government of India, in its Budget 2017–18, planned several steps for the sustainable development of agriculture. Selected major trends include the growing use of farm machinery and equipment, the importance of irrigation technology and the potential of seed technology. Selected major challenges include small and scattered landholdings, procurement processes for farmers, and lack of support infrastructure for warehousing and logistics.
The Government of India’s emphasis on adopting technology in agriculture has increased production and productivity. However, there is considerable scope for improving the current level of productivity in the country. The vision is to create hubs for hi-tech and high-value farm equipment in the country. Also, the availability of infrastructure will help in enhancing the export of agricultural products from India and allow the country to develop as a major exporting HUB.
The Soft Power of Culture & Tourism:
India’s culture and tourism sector are one of its most vibrant service sectors. The country’s rich culture and heritage make it one of the most interesting destinations in the world to visit. Both Indians residing in India and foreigners are interested in exploring the country, which boasts a remarkable diversity in terms of food, culture, customs, and geography. India ranks 15th in the world in terms of international tourism receipts, with a 1.62% share of the world’s tourism receipts, making it a large market for travel and tourism.
Selected trends include the growth of business travel (CAGR of 11.5% till 2019), the increase in spiritual tourism due to Ayurveda, yoga, Siddha and naturopathy, and an increase in the number of online travel and tour operators who are providing competitive prices and options to consumers. Selected challenges include intense competition, the entry of new players and the bargaining power of consumers.
India is expected to be ranked among the top five business travel markets globally by 2030 as business travel spending in the country is expected to treble by 2030 from US$30 billion in 2015. International hotel chains will likely increase their expansion and investment plans in India and are expected to account for a 50% share in the Indian hospitality industry by 2022 (from the current 44%).
A Digital Bridge to growth:
Information technology (IT) has, over the years, evolved from being a business enabler to a business driver, and organizations have started differentiating themselves on innovative IT adoption. Digital is not just about technology implementation. It encompasses the transformation of business, enterprises, and governments using technology, to make experiences better, communication effective and work simpler. Digitization has become a vital component in the growth of the Indian economy.
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The digital boom in India is driven by a concerted play of both supplies- and demand-side factors. The impact of digitization can be seen across industries and several sectors, such as agriculture, education, finance, and healthcare. Selected trends include innovation, public service efficiency, economic growth, and collaboration. Selected challenges include connectivity, trust, digital literacy, and data security. Digital is uplifting our country towards advancement and filling gaps owing to physical infrastructure. With digital, government services are reaching citizens in the remotest of locations. Digital and technology are playing a crucial role in ensuring the efficient last-mile delivery of services to citizens.
Opportunities for Investment:
India continues to be a favored destination among foreign investors, including US-based PE firms. Over the years, the government has been pruning the list of prohibited sectors and liberalizing FDI caps on various sectors. FDI in India crossed US$43 billion in FY17, with PE accounting for around 58% of the capital inflow.
Government reforms such as Make in India, Digital India, Startup India, and Smart Cities have also garnered significant interest from foreign investors. The development of 100 smart cities, each with a population of 1 million, will lead to rural to urban migration of people and job creation around the construction and running of these cities, thus resulting in an economic thrust.
Additionally, GST is expected to impact the investment landscape with the merging of most of the existing taxes into a single system of taxation, thus eliminating the multiplicity of taxes and making India a single common market. Cumulative FDI inflows from the US over the last five fiscals have amounted to a little under US$10 billion. Major US-based PE firms have already established a strong presence in India.
The potential for US funds in India continues to grow, with India offering a host of opportunities across multiple sectors. Major US-based players have already expressed interest in partnering with Indian companies in sectors such as education, infrastructure, technology, and manufacturing, and are currently monitoring the impact of GST.
Ties between the US and India have been strengthened over the past 70 years and especially fast-paced in trade relationships in the last few years. Leaders of both nations are resolved to expand and deepen their strategic partnership. As leading engines of growth in the global economy, both countries face similar global challenges, such as generating employment and boosting the industry.
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India is poised for a fundamental change in terms of ease of doing business. The government has formulated an output-outcome framework to work towards improving India’s ranking on the World Bank’s Doing Business Survey India is also looking for massive investments to create jobs for its burgeoning young workforce, housing, and infrastructure. Several initiatives have helped bring FDI inflows into India. Some of the government’s key initiatives to increase FDI inflows into India are:
100% FDI in several segments, including railway infrastructure (excluding operations), manufacture of medical devices and financial services provided by non-banking financial companies (NBFCs);
National Highway Authority of India (NHAI) offering a risk cover to foreign investors for faults in structural design, sub-standard quality of construction and loss of traffic;
Grant of Permanent Residency Status (PRS) to foreign investors investing a minimum of INR.10 crore within 18 months or INR. 25 crore within 36 months;
100% FDI in asset construction companies under the automatic route;
Easing of area restriction norms, reduction of minimum capitalization and enablement of easy exit from projects in the construction development sector;
Raising of FDI cap in insurance from 26% to 49%;
Abolition of the Foreign Investment Promotion Board (FIPB) and permitting of the automatic route for over 90% of FDI inflows (without prior approval) The United States and India have come a long way from their origins as individual states coming together to forge pluralistic, democratic nations. This progress often has been uneven and difficult, but today both countries serve as examples of what nations can achieve when they embrace democracy, tolerance, inclusiveness, the rule of law and an appreciation for the dignity of all people.
Likewise, the relationship between the United States and India, while often bumpy, has proven durable in recent years, and is only getting stronger. And yet, continuing to build this relationship will require significant investment for years to come. It will require sometimes looking beyond the urgent and focusing on the important.
Expected result due to Proper Bilateral Trade Tie-up between India & US
On the positive side, ties between India and the United States have seen a considerable improvement in the last few years with a convergence of views on many issues. And together, the United States and India could be partners in building a more prosperous, secure, and free world. There are few examples of development on such a large and diverse scale. India holds tremendous investment potential across many sectors and expected to bring US$500 billion trade between both countries. By working and investing together, Indian and USA companies can bring about positive economic change across areas such as employment (10 million+), infrastructure development, and skills and knowledge transfer.
Opinions expressed by authors are personal and don’t reflect the editorial policy of The Policy Times. For any queries or clarifications, authors can be reached at [email protected]