A ROBUST ECONOMIC RELATIONSHIP

(Mains GS2:Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.& Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora) 

Context:

• Under the new U.S. administration, the economic relationship with India can be expected to be on the radar as India has enjoyed bipartisan support in the U.S.
• A closer economic partnership would bring gains to both sides in terms of GDP, employment, and productivity, given the complementary natures of their economies.

Industry’s perspective:

• From the industry perspective, a robust collaborative agenda would rest on a comprehensive set of actions which can take bilateral trade in goods and services to the desired goal of $500 billion.
• In the five years to 2019, bilateral trade grew at a CAGR of 7.7% per year to $146 billion.
• If we assume the same rate of growth, the $500 billion target will be achieved by 2036.
• To ensure this, the CAGR would need to be set at 11.9%.
• This is doable if the right policy actions are taken.

Areas of collaboration:

Shared contribution to curve Covid:

• A collaborative response to the pandemic would contribute to global containment of the virus.
• Business partnerships are already taking place in the supply chain to ensure coordinated shipping, distribution, and last-mile connectivity.
• As India becomes the hub of global vaccine distribution, building confidence in the Indian IPR regime, reviving the U.S.-India Health Dialogue, and mutually recognising standards and approvals will help drive healthcare exchanges.

Strengthen trade architecture:

• The macro trade architecture can be strengthened with a broad trade agreement focusing on resolving the low-hanging fruit.
• The U.S.-India Trade Policy Forum meetings can be revived along with a cross-sector track-2 group to look at convergence on issues such as market access.
• There is potential for flexibility from both sides for restoring the Generalised System of Preferences which would help lower duties for certain Indian products.
• The two countries should consider initiating discussions on a free trade agreement.

Mobility of professionals:

• Mobility of professional labour would aid trade in services.
• Recent regulations in the U.S. have impacted labour mobility which can be addressed through immigration reforms for employment-based visa backlogs and smooth and timely processes.
• The MoU on labour cooperation signed in 2011 could be updated in line with India’s recent labour regulatory changes.
• This may also be a good time to reconsider a totalisation agreement pertaining to social security, given that both have already entered into such agreements with many of the same partner countries. 

Defence ties:

• Defence industry ties can be stepped up in coordination with industry, as both sides benefit from U.S. technology and Indian manufacturing in this sector.
• A defence dialogue including the private sectors of both sides could help in co-production and co-development in the defence and aerospace sectors.

Engagement with small enterpreneurs:

• Engagement of small and medium enterprises (SMEs) can be stepped up.
• Smaller U.S. companies can find significant new opportunities for investments in India and sourcing from India.
• A U.S.-India SME CEOs Forum can be set up to catalyse such partnerships.

Clean energy and climate change:

• Clean energy and climate change, high priorities of the U.S. administration, are also areas where India has made rapid strides.
• The U.S.-India Strategic Energy Partnership should be geared towards joint investments in industrial decarbonisation, carbon dioxide removal and green hydrogen.
• The programmes of Partnership to Advance Clean Energy Research, Partnership to Advance Clean Energy Deployment and Promoting Energy Access through Clean Energy must be relaunched.

Digital economy:

• A digital economy partnership is critical.
• India has proved its mettle in this space with new opportunities opening up in robotics, space, AI and electric vehicles.
• It is also important to disseminate information on India’s IPR regime improvements and work towards taking India off the U.S. Trade Representative IPR priority watchlist.

Conclusion:

• Although India – U.S. ties growing every day, other opportunities in the bilateral economic relationship include education, innovation and R&D, and agricultural trade and technology also need to flourish.