Contrary to expectations after the ‘Howdy, Modi’ event in Houston and the bonhomie, India and the United States failed to arrive at a limited trade deal that was expected to be announced during the visit of Prime Minister Narendra Modi to the US.
In fact, US President Donald Trump, in his interaction with the media ahead of his bilateral meeting with PM Modi, had expressed hope that both sides will "very soon" conclude a limited trade pact while a comprehensive free trade agreement will be signed later.
The deal stumbled over duties imposed by India on information and communication technology products — the US wanted the 20 percent duty on mobile phones and ethernet switches to be reduced or eliminated. Washington is also reported to have demanded greater access to the Indian market for medical devices such as stents and knee implants apart from its dairy and agricultural products.
India-US bilateral ties deteriorated under Trump administration after Washington withdrew zero duty benefits to Indian exports worth $5.6 billion, with New Delhi imposing retaliatory tariffs on 29 products imported from the US. The limited or interim trade agreement was expected to cover tariff-related concessions for US farm products, especially dairy items, pricing of medical devices, and information and communication technology products.
Here’s is a list of facts you should know about the US-India trade ties:
Trading in and out
US goods and services trade with India totalled an estimated $142.1 billion in 2018. Out of which, exports were $58.9 billion and imports were $83.2 billion.
The US goods and services trade deficit with India was $24.2 billion in 2018.
India is currently the 9th largest goods trading partner of the US with $87.5 billion in total (two way) goods trade during 2018.
The US goods exported to India totalled $33.1 billion and goods imported from India totalled $54.4 billion. The US goods trade deficit with India was $21.3 billion in 2018.The top US export (to India) categories (2-digit HS) in 2018 were:
Precious metal and stone (diamonds) ($7.9 billion), Mineral fuels ($6.2 billion), Aircraft ($3.0 billion), Machinery ($2.2 billion), and Optical and medical instruments ($1.6 billion). The top US import (from India) categories (2-digit HS) in 2018 were: Precious metal and stone (diamonds) ($11 billion) Pharmaceuticals ($6.3 billion) Machinery ($3.3 billion) Mineral fuels ($3.2 billion), and Vehicles ($2.8 billion) Trade balance
India and the US are one of the important strategic partners to advance common interests regionally and globally. Bilateral trade in goods and services is 2 percent of US world trade, and has grown in recent years.
According to the US Department of Commerce, US exports of goods and services to India supported an estimated 197,000 jobs in 2015, with 82,000 supported by goods exports and 116,000 supported by services exports.
The trade relationship is more consequential for India; in 2017, the United States was its second largest export market (16 percent share) after the European Union (EU, 17 percent), and third largest import supplier (6 percent) after China (17 percent) and the EU (10 percent).
US-India foreign direct investment (FDI) is at its budding stage. Defence sales are also significant in bilateral trade. Civilian nuclear commerce, stalled for years over differences on liability protections, has produced major potential US supply contracts.
Investment India's direct investment in the US is led by professional, scientific, and technical services, manufacturing, and depository institutions, accounting $9.8 billion in 2017, rose by 11.5 percent from 2016. On the other hand, US direct investment in India is led by professional, scientific, and technical services, manufacturing, and wholesale trade, which accounted $44.5 billion in 2017, rose 15.1 percent from 2016.
Sales of services in India by majority US-owned affiliates were $27.0 billion in 2016, while sales of services in the United States by majority India-owned firms were $17.0 billion.
Being one of the world’s fastest-growing economies with more than 7 percent growth projected for 2019, major economic challenges faced by India are poverty, unemployment and infrastructure gaps.
India imports about 80 percent of its oil needs. As a result, rising energy prices and other global factors have led to depreciation of the Indian rupee against the US dollar, leading to inflation concerns.
Domestic economic measures include demonetisation in 2016, which removed 86 percent of currency by value from circulation in a mostly failed effort to address tax evasion and corruption, and the roll-out of new national value-added goods and service tax in 2017 to streamline the tax regime.
Current negotiations and agreement
Both India and the US, have held “intensive” negotiations to address the US steel and aluminum tariffs, India’s GSP status, and other trade issues. Dialogues include the government-to-government Strategic and Commercial Dialogue (S&CD) and Trade Policy Forum, and the private sector-based CEO Forum.
Source: CRS analysis, Bureau of Economic Analysis (BEA) data. IBEF.org https://commerce.gov.in/ https://usispf.org/us-india-trade https://fas.org/sgp/crs/row/IF10384.pdf