The start of 2022 is a good harbinger of the growing trade relationship between India and the United States.
Trade between India and the US in goods and services set a new record as trade figures jumped a whopping 45% to a historic high of $113 billion, from the $78 billion recorded at the end of 2020. The split was between Indian exported goods worth over $73 billion and imported goods over $40 billion.
This marks the largest volume of goods trade in a calendar year in India-US economic history, this despite the fact we are not yet out the pandemic and supply chains continue to be disrupted. This also reaffirms how the India-US partnership is the most strategic partnership of the 21st century as this near 50% uptick in trade makes it the largest increase for Washington with any of its trading partners.
I am convinced that the reasons include the increase in demand in the American market, with a focus on consumption-driven growth. There has been pent-up demand for items like jewelry and electronics, particularly in the last six months. American companies have sought to diversify supply chains, with electronic component makers moving their production to India. Apple now exports a million smart phones from India to the US every month.
As I outlined in my most recent op-ed, though trade between India and the United States has not quite reached the level of a Free-Trade Agreement (FTA), the needle has been moved more closely towards an early harvest deal. The momentum has also received a boost last November when US Trade Representative (USTR) Katherine Tai and Commerce and Industry Minister Piyush Goyal restarted the Trade Policy Forum (TPF) after a hiatus of four years.
While there are still several outstanding market issues to sort through, but soon following the TPF, we have seen the import of mangoes and pomegranates from India and exported supply of cherries, alfalfa hay, pork, and pork products to India.
As Minister for Trade and Commerce Piyush Goyal spoke about at USISPF’s Fourth Annual Leadership Summit, he is eyeing an ambitious bilateral trade target of a trillion dollars between India and the United States by the year 2030. For such a voluminous target to be achieved, the bulk of foreign investments coming into an emerging market like India, will have to be led by the United States.
The recent statement coming from the Quad Foreign Ministers’ meeting in Australia has also highlighted the need to rebuild supply chains disrupted by the pandemic. The fact that trade between India and the US has exceeded the $100 billion mark in the midst of a third wave (Omicron), shows that there is only an upward trajectory once the harmful effects of the pandemic subside.
Bilateral trade now can take a robust shape under a multilateral umbrella through the Quad. As I have highlighted before, given that the AUKUS is a more security-led trilateral pact, the best way for the Quad to epitomise a non-security element is to further economic engagement between the four nations. India already has a Comprehensive Economic Partnership Agreement with Japan, and New Delhi is in advanced stages of signing an early harvest deal with Canberra.
In order for states in the Indo-Pacific not to fall into debt-trap diplomacy, the Quad partners should look to enhance and invest in critical emerging technologies and combat the threat of climate through emphasis in renewables in the emerging markets of the region.
Since the outbreak of the pandemic, India, and the United States, both among the hardest hit countries, showed tenacity and resilience and came together to help each other during the first and second wave of Covid-19, and the new variant continues to pose challenges for the global community. During the inaugural in-person Quad Leaders’ Summit last September in Washington DC, Prime Minister Narendra Modi announced that New Delhi “will start supply of India-made Covid-19 vaccines to the Indo-Pacific region with eight million doses, from October 2021”. With US-led mRNA technologies, India’s pharmaceutical strengths and synergy from Australia and Japan, the Quad members can mitigate the supply chain weakness and accelerate towards vaccine diplomacy.
The joint statement issued after the recent Quad Foreign Ministers’ meeting highlights this move, as the Quad partners have collectively provided more than 500 million vaccine doses and have pledged to “donate more than 1.3 billion vaccine doses globally”.
The Quad is still in its early days, but a shared understanding from four vibrant democracies on the pressing global challenges is a good harbinger for stronger trade and cross-border flows of goods and services.
With the US as India’s largest trade partner, we strongly believe there is potential for increased trade resulting from continued dialogue, in-person meetings and additional trade agreements, and we at USISPF are glad to help play a part in making this happen.
Mukesh Aghi is CEO & President, US-India Strategic Partnership Forum (USISPF).