India is one of the fastest-growing economies in the world, with a population of over 1.3 billion people and a GDP of $2.9 trillion in 2021. The country offers a huge market potential for U.S. businesses, as well as a strategic partner for advancing U.S. interests in the Indo-Pacific region and beyond.
According to the U.S. Department of State, "The United States and India have shared interests in promoting global security, stability, and economic prosperity through trade, investment, and connectivity. The United States supports India’s emergence as a leading global power and vital partner in efforts to ensure that the Indo-Pacific is a region of peace, stability, and growing prosperity."
In this article, we will explore some of the key areas of cooperation and opportunities for both countries in the Indian market, as well as some of the challenges and risks that need to be addressed.
Trade and Investment
Trade and investment are the pillars of the U.S.-India economic relationship. In 2021, overall U.S.-India bilateral trade in goods and services reached a record $157 billion, making the United States India’s largest trading partner and most important export market. The two countries have also increased their cooperation on trade policy issues, such as intellectual property rights, digital trade, market access, and dispute settlement.
The United States is also one of the largest sources of foreign direct investment (FDI) in India, with a cumulative stock of $46 billion as of March 2020. Many U.S. companies view India as a critical market and have expanded their operations there in sectors such as information technology, energy, health care, defense, aerospace, and education. Likewise, Indian companies seek to increase their presence in U.S. markets and at the end of 2020, Indian investment in the United States totaled $12.7 billion, supporting over 70,000 American jobs.
The two countries have also established several bilateral dialogues and working groups to facilitate trade and investment flows, such as the Trade Policy Forum, the Strategic Clean Energy Partnership, the Climate Action and Finance Mobilization Dialogue, and the CEO Forum.
However, there are also some challenges and barriers that hinder the full potential of the trade and investment relationship. Some of these include:
Tariffs and non-tariff barriers: Both countries impose relatively high tariffs on some products, such as agricultural goods, automobiles, steel, and aluminum. They also face non-tariff barriers such as sanitary and phytosanitary measures, technical standards, local content requirements, licensing procedures, and regulatory uncertainty.
Trade deficit: The United States has a trade deficit with India of $28 billion in 20211, which has been a source of friction between the two countries. The United States has sought to reduce this gap by increasing its exports of goods and services to India, especially in areas where it has a comparative advantage such as energy, aviation, defense, and health care.
Trade disputes: The two countries have been involved in several trade disputes at the World Trade Organization (WTO) and other forums over issues such as subsidies, solar panels, steel, aluminum, agriculture, and digital services taxes. Some of these disputes have resulted in retaliatory tariffs or sanctions by both sides.
To overcome these challenges and enhance their trade and investment ties, the two countries need to work together to:
Negotiate a comprehensive bilateral trade agreement that would lower tariffs and non-tariff barriers, harmonize standards, protect intellectual property rights, promote digital trade, and resolve disputes amicably.
Expand their cooperation on regional and multilateral trade initiatives, such as the Indo-Pacific Economic Partnership, the Quad Economic Framework, and the WTO reform.
Strengthen their dialogue and engagement on emerging issues such as climate change, cybersecurity, artificial intelligence, and biotechnology.
Defense and Security
Defense and security are another key area of cooperation between the United States and India. The two countries share common interests in countering terrorism, preventing proliferation of weapons of mass destruction, maintaining freedom of navigation and overflight, and ensuring stability and peace in the Indo-Pacific region.
The two countries have signed several landmark agreements that enhance their defense cooperation, such as:
The Logistics Exchange Memorandum of Agreement (LEMOA), which allows them to access each other’s military facilities for logistics support.
The Communications Compatibility and Security Agreement (COMCASA), which enables them to share secure communications and data.
The Basic Exchange and Cooperation Agreement (BECA), which facilitates the exchange of geospatial information and intelligence.
The Industrial Security Annex (ISA), which allows them to collaborate on defense production and technology.
The two countries have also increased their joint exercises and training, such as the Malabar naval exercise, the Yudh Abhyas army exercise, the Cope India air force exercise, and the Tiger Triumph humanitarian assistance and disaster relief exercise.
The two countries have also expanded their defense trade and technology cooperation, with the United States becoming one of the largest suppliers of defense equipment to India. According to the U.S. Department of Defense, the total value of U.S. defense sales to India was over $20 billion as of 2020. Some of the major deals include:
The sale of 22 Apache attack helicopters and 15 Chinook heavy-lift helicopters for $3 billion.
The sale of 24 MH-60R Seahawk multi-role helicopters for $2.6 billion.
The sale of six P-8I Poseidon maritime patrol aircraft for $2.1 billion.
The sale of 145 M777 howitzers for $737 million.
The sale of 10 C-17 Globemaster III transport aircraft for $4.1 billion
The two countries have also established several mechanisms to facilitate their defense cooperation, such as the Defense Technology and Trade Initiative (DTTI), the Defense Policy Group (DPG), the Defense Procurement and Production Group (DPPG), and the Military Cooperation Group (MCG).
However, some challenges and risks also affect the defense and security relationship. Some of these include:
Divergent strategic interests: While the two countries share a common vision of a free and open Indo-Pacific, they may have different priorities and preferences on some regional issues, such as the role of China, Pakistan, Iran, Afghanistan, and Myanmar. They may also have different views on the use of force, the role of multilateral institutions, and the balance between sovereignty and human rights.
Diversified defense partnerships: Both countries maintain diversified defense partnerships with other countries, which may create some complications or competition in their bilateral cooperation. For example, India has a longstanding defense relationship with Russia, which is a strategic rival of the United States. India also has a growing defense relationship with France, Israel, and Japan, which may affect its procurement decisions or interoperability with U.S. platforms.
Domestic constraints: Both countries face some domestic constraints that may limit their defense cooperation. For example, the United States has some legal and policy restrictions on the transfer of sensitive technology or equipment to India, such as the International Traffic in Arms Regulations (ITAR), the Missile Technology Control Regime (MTCR), and the Countering America’s Adversaries Through Sanctions Act (CAATSA). India also has some bureaucratic and political hurdles that may delay or derail its defense procurement or production processes, such as complex procurement procedures, corruption allegations, budgetary constraints, and parliamentary oversight.
To overcome these challenges and enhance their defense and security ties, the two countries need to work together to:
Align their strategic interests and perspectives on regional and global issues through regular dialogue and consultation at various levels, such as the 2+2 Ministerial Dialogue, the Quad Leaders Summit, and the U.S.-India Strategic Partnership Forum.
Balance their diversified defense partnerships with mutual respect and understanding, and avoid actions that may undermine each other’s security or interests, such as imposing sanctions, blocking arms sales, or supporting rival factions.
Address their domestic constraints by streamlining their legal and policy frameworks, enhancing their transparency and accountability, increasing their budgetary allocations, and building public support for their cooperation.
Education and Culture
Education and culture are another important area of cooperation between the United States and India. The two countries have a strong people-to-people connection, reflected in the four million-strong Indian American diaspora and vibrant educational exchange between the two countries.
According to the U.S. Department of State, "The nearly 200,000 Indian students in the United States contribute $7.7 billion annually to the U.S. economy." India is also the second-largest source of international students in the United States, after China. The United States is also one of the most popular destinations for Indian students who want to pursue higher education or research opportunities.
The two countries have also established several initiatives and programs to promote educational cooperation, such as:
The Fulbright-Nehru Program, which provides scholarships for Indian and American students, scholars, teachers, and professionals to study, teach, or conduct research in each other’s countries.
The U.S.-India Higher Education Dialogue, which brings together government officials, academics, business leaders, and civil society representatives to discuss ways to enhance collaboration on higher education issues such as quality assurance, accreditation, innovation, entrepreneurship, online education, and skill development.
The U.S.-India 21st Century Knowledge Initiative, which provides grants for institutional partnerships that foster collaboration on research and curriculum development.
The Passport to India Initiative, which encourages more American students to study and intern in India through scholarships, online courses, and virtual exchanges.
The two countries have also established several cultural exchange programs and platforms, such as:
The Fulbright-Nehru Program, which also supports cultural exchanges for artists, musicians, writers, and museum professionals.
The American Center and the American Corners, which provide information and resources on U.S. culture, society, history, and values to Indian audiences.
The U.S.-India Cultural Dialogue, which fosters dialogue and collaboration among cultural leaders and institutions from both countries.
However, there are also some challenges and opportunities that affect the education and culture relationship. Some of these include:
Visa and immigration policies: Both countries need to facilitate the mobility of students, researchers, professionals, and cultural practitioners by streamlining their visa and immigration policies and procedures. The United States should also address the concerns of Indian students and workers regarding the H-1B visa program, which allows them to work temporarily in specialty occupations in the United States.
Quality and diversity of education: Both countries need to ensure the quality and diversity of their educational institutions and programs by enhancing their accreditation systems, promoting academic freedom and integrity, encouraging innovation and entrepreneurship, and expanding access and inclusion for underrepresented groups.
Cultural awareness and sensitivity: Both countries need to foster cultural awareness and sensitivity among their people by increasing their exposure to each other’s cultures, languages, religions, arts, and media. They should also address any stereotypes or misconceptions that may hinder mutual understanding and respect.
To overcome these challenges and enhance their education and culture ties, the two countries need to work together to:
Negotiate a bilateral agreement on higher education cooperation that would facilitate the recognition of degrees and credits, the mobility of students and faculty, the establishment of joint or dual degree programs, and the collaboration on research and innovation.
Expand their scholarship and exchange programs for students, researchers, professionals, and cultural practitioners from diverse backgrounds, fields, and regions.
Support their educational and cultural institutions and organizations in developing partnerships, projects, and platforms that showcase their excellence, diversity, and creativity.
The United States and India have a strong and multifaceted partnership that spans across various domains of cooperation. The two countries share common values, interests, and aspirations as democracies, as Indo-Pacific powers, and as global leaders. By working together on trade and investment, defense and security, education and culture, and other areas of mutual benefit, the two countries can advance their own prosperity and security, as well as contribute to a more peaceful and stable world.
What Is The US Strategic Interest In India?
The US strategic interest in India is to support India’s emergence as a leading global power and a vital partner in ensuring that the Indo-Pacific is a region of peace, stability, and growing prosperity. The United States views India as a key partner in addressing common challenges such as countering terrorism, preventing proliferation of weapons of mass destruction, maintaining freedom of navigation and overflight, promoting regional connectivity and economic integration, upholding democratic values and human rights, and combating climate change and pandemics.
What Is The trade Relationship Between US And India?
The trade relationship between the US and India is one of the largest and most dynamic in the world. In 2021, overall US-India bilateral trade in goods and services reached a record $157 billion. The United States is India’s largest trading partner and most important export market. The two countries also cooperate on trade policy issues such as intellectual property rights, digital trade, market access, and dispute settlement.
What India trades with USA?
India trades with the USA a variety of goods and services across various sectors. According to the U.S. Census Bureau, the top five categories of U.S. imports from India in 2020 were:
Pharmaceuticals ($8.8 billion)
Precious stones and metals ($7.7 billion)
Machinery ($3.4 billion)
Mineral fuels ($2.9 billion)
Textiles ($2.7 billion)
The top five categories of U.S. exports to India in 2020 were:
Precious stones and metals ($8.3 billion)
Machinery ($6.1 billion)
Mineral fuels ($5.2 billion)
Aircraft ($4.4 billion)
Electrical machinery ($2.7 billion)
What Is India’s Trade Surplus With The US?
India’s trade surplus with the US is the difference between the value of its exports to the US and the value of its imports from the US. According to the U.S. Census Bureau, India had a trade surplus of $28 billion with the US in 2020, meaning that it exported more to the US than it imported from the US. This was a slight increase from the trade surplus of $23.3 billion in 2019.
Explain The Relationship Between India And America
The relationship between India and America is a strategic partnership that is founded on shared values, common interests, and mutual respect. The two countries cooperate on a wide range of diplomatic, economic, and security issues, such as defense, non-proliferation, regional cooperation in the Indo-Pacific, shared democratic values, counterterrorism, climate change, health, energy, trade and investment, peacekeeping, the environment, education, science and technology, agriculture, space, and oceans. The two countries also have a strong people-to-people connection, reflected in the four million-strong Indian American diaspora and vibrant educational exchange between the two countries. The two countries have established several bilateral dialogues and working groups to facilitate their cooperation, such as the 2+2 Ministerial Dialogue, the Trade Policy Forum, the Strategic Clean Energy Partnership, the Climate Action and Finance Mobilization Dialogue, and the CEO Forum. The two countries also participate in regional and multilateral initiatives such as the Quad, the Indo-Pacific Economic Partnership, and the United Nations. The two countries are committed to enhancing their partnership to advance their own prosperity and security, as well as contribute to a more peaceful and stable world.