India-U.S. trade ties are essential to the two countries’ strategic partnership. India’s economic size complements the dynamism of its market, and it has been a fruitful investment avenue for many countries across the globe. The World Bank has reassessed its prediction, and its latest report predicted India’s economy of $5 trillion within a few years. Bilateral commercial ties between the two democracies are crucial in this context. India-U.S. merchandise trade in 2020 constituted 2 percent of the US overall trade volume. It is 12 percent for India in the same year. The Biden administration has prioritized the burgeoning India- US bilateral trade ties in the post- COVID world order.
India-U.S. Commercial Ties: An Overview
The United States is India’s largest trading partner, and the US market is vital for India’s exports. Currently, the US is the third most significant investor in India. For the US, India was the 11th largest trading partner, according to 2020 WTO data. Bilateral economic ties in goods and services between the two democracies reached their peak of $157 billion in 2021. According to the Department for Promotion of Industry and Internal Trade, the Government of India, the US is the second largest source of India’s FDI Equity inflows. Between April 2020 and March 2021, the figure for the inflows stood at $13.6 billion. For the United States, India has been one of the largest markets in the world and a critical site for the expansion of US business establishments in the region.
As of 2020, significant commodities exports by India to the US led to impressive trade gain in India’s favour. As of June 2022, the figure by the Government of India’s Ministry of Commerce and Industry revealed a surge of nearly 23 percent in India’s overall exports to countries between June 2021 and July 2022. Indian companies have made their footprints across the US and are expected to expand their networks as India-U.S. commercial ties grow.
Since 2014, the trade and investment relationship between the two countries has boomed. During Prime Minister Narendra Modi’s visit to the US in 2014, India and the US had shared the vision of a total bilateral trade in goods and services pegged at $500 billion. They had set up a bilateral Investment Initiative in 2014 with a particular focus on facilitating FDI and foreign portfolios, inflows, capital market development, and infrastructure development funding. The two countries and their leaders, PM Modi and the then President Obama agreed to develop several mechanisms to counter trade barriers. Some initiatives include setting up bilateral dialogue mechanisms to facilitate participation on economic and trade issues at the ministerial level. Two examples are – a Ministerial Level Economic and Financial Partnership and a Ministerial Trade Policy Forum. The two countries had set up the India-U.S. Infrastructure Collaboration Platform, followed by the signing and a joint statement by the two leaders. This collaboration aimed to facilitate US industry participation in major Indian infrastructure projects to enhance bilateral cooperation further, thus strengthening commercial ties. The two countries have been supporting the collaboration. US firms have been given the lead role in developing cities such as Vishakhapatnam, Ajmer and Allahabad as Smart Cities. Each of these cities will be developed as Smart Cities with the help of United States Trade and Development Agency aka USTDA.
Besides, a few initiatives have also been taken up by both countries to integrate the interests of private business investment enterprises. One such example is the bilateral India-U.S. CEO’s Forum. The Forum last met virtually in July 2020. Hundreds of Indian companies have invested in the US in the last decade, which is a vital component of the growing bilateral commercial ties. A report by the Ministry of External Affairs of India (MEA) stated that these companies have also benefited from the efforts of the two countries’ leaders to strengthen commercial ties. Big Indian companies such as Reliance Industries Limited, Tata Consultancy Services, Wipro, Infosys, Mahindra, Piramal, HCL Technologies, SunParm, Dr. Reddy’s Laboratories, etc., have invested billions of dollars in at least 35 states in the United States according to the report. During his visit to Washington in 2021, PM Modi stated that trade would remain a “key area of cooperation” between India and the United States. In June 2022, President Joe Biden reflected upon the United States’ embracing India as a key partner in the newly launched Indo-Pacific Economic Framework (IPEF), a regional trading platform. A Congressional Research Services (CRS) report stated that the two countries had convened a ministerial-level bilateral Trade Policy Forum (TPF) in November 2021 to strengthen their ties and chalk out ways to navigate the differences in trade frictions in some critical areas. US Secretary of State, Antony Blinken, had expressed the United States’ willingness to resume the U.S.- India Commercial Dialogue and CEO Forum to deepen bilateral commercial and investment ties with India. The Dialogue is a part of the India-U.S. Strategic and Commercial Dialogue (S&CD) platform established in September 2015 during the Obama administration to strengthen economic and commercial partnerships. The Biden administration has hinted at India’s important role as a member of the twelve-nation IPEF.
According to the US Department of Commerce and Bureau of Census, top India’s exports to the US include precious metals and stones, pharmaceutical products, apparel articles, textile artworks, mineral fuels, organic chemicals, machinery, aircraft, etc. Similarly, top US exports to India include precious metals and stones, nuclear reactors, boilers, and machinery, optics, surgical instruments, electrical machinery products, aircraft, spacecraft, vehicle hardware products, organic chemicals, iron, steel, etc. Defense equipment comprises critical import items for India. In bilateral services, telecommunications, information services, computers, and hardware items are the top Indian exports. On the other hand, travel, including those for private and business, are the top US export. Indian FDI inflows in US markets come from professional services, depositary institutions, and manufacturing sectors. A source indicated that more than 2,00,000 Indian students residing in the country contribute more than $7 billion to the US economy annually.
Trade Investments between India and South Eastern US States
The Southeast region of the United States is the hub of several Fortune 500 global companies. The region south of the Ohio river is generally known as the Southeast region of the United States. Some important south-eastern states are Alabama, Arkansas, Kentucky, Louisiana, South Carolina, and Mississippi. In 2020, the south-eastern states of Virginia, Georgia, Florida, North Carolina, and Tennessee hosted a combined 81 (eighty one) Headquarters out of those 500 companies. Since the late twentieth century, the region’s economic fate has been rapidly changing. Mega business chains such as Walmart and Coca-Cola are headquartered in Arkansas and Georgia. In January 2022, the Indian diaspora in the southeast US was more than five lakhs, according to data by the Consulate General of India in Atlanta, Georgia. The major concentrations are in the states of Florida (180,000) and Georgia (140,000). The total merchandise trade between India and the U.S.’s Southeast region was $12.5 billion in 2019 and $12.9 billion by the end of 2021. Indian companies have established their footprints in various sectors in this part of the United States.
More than 150 Indian companies, including small and medium companies, have invested in the south-eastern states of the United States. Major investments have been in technology, automobiles, food, agriculture, chemicals, healthcare, and logistics. As per the official figures released by the Consulate, investments in the manufacturing and services sectors account for more than $13.5 billion. Moreover, more of these companies have directly created 12,000 jobs for the locals. Major Indian Investments: The Tata Consultancy Services (TCS), a global IT services and consulting company headquartered in Mumbai, India, has its presence in St. Petersburg (Florida), Atlanta (Georgia), Charlotte (North Carolina), and Little Rock (Arkansas). Wipro has its presence in 23 states across the United States. It has its major delivery center in Atlanta, Georgia. Another Indian aluminum company, Novelis Inc., a subsidiary of the parent company, Aditya Birla Group, has invested heavily in this region.
Georgia has topped the investment list with the largest trade volume with India in the Southeast US. The 2022 report released by the Consulate General of India in Atlanta stated that Georgia alone received $851 million as investments in the service sector by Indian companies. The state has also been the recipient of more than $11 billion worth of investments from Indian investors. Novelist Inc. shared the majority of the total investments in Georgia. The company had invested $2.6 billion in 2007. The company acquired the Atlanta-based carbon black manufacturing company Columbian Chemical in 2012, and now it has been in the sector for a decade. Similarly, the Jindal Group invested $180 million in the southeast US in 2015. Companies such as Wipro, TCS, Infosys, and Hexaware have invested in the service sectors in Florida and Tennessee. TCS and Infosys have invested in the sector in Mississippi as well.
Major South-eastern US states investments: Coca-Cola, a multinational company with its headquarters in Atlanta, has significant investments across India. Recently, it has invested millions of dollars in tagging out the “fizzy drink” status from its wide range of products and branded as “fruit juices” instead. Walmart, the Arkansas-based multinational corporation, has vouched to invest $10 billion in India’s e-commerce giant Flipkart. Honeywell International Inc, a Fortune 100 multinational corporation headquartered in Charlotte, North Carolina, has integrated itself into India’s trade investment ecosystem for decades.
The company has investments in India’s engineering and manufacturing sectors. It has employed more than 12,000 locals with its presence in at least 20 cities across India. It is expected that the Indian-origin companies and their efforts to expand their businesses in the Southeast US would create more employment for locals in the coming years. With the increased involvement of Indian entities in the region, south-eastern states’ economies will further integrate into India’s economy.
Thus investments by Indian companies have a direct role in deepening trade and commercial ties between India and the United States. Also, the presence of the south-eastern US states’ major IT, computer, and manufacturing companies in India, especially from the states of Georgia and Florida, benefits India’s economy.
The trade and commercial ties between India and the US form a crucial part of India-U.S. bilateral relations. American businesses may actively engage in PM Modi’s national missions such as “Make in India’, ‘Atmanirbhar Bharat’ and “PM Gati Shakti.