India-US Economic Partnership

Washington, DC
September 25, 2008

The growing economic partnership between the US and India has been one of the pillars of the transformed bilateral relationship. The USA happens to be India’s largest export destination and also one of the leading foreign investors in India. The complementarities between the two economies have made the two sides to seek a strong economic engagement to leverage the advantages available with each other. 

Bilateral Trade and Investment: The India-US bilateral trade stood at US$ 33.9* billion in 2007-08.During the year 2007-08, merchandise exports from India to US increased by 9.81% to US$ 20.7 billion as compared to US$ 18.8 billion in 2006-07 and merchandise exports from US to India increased by 12.57% to US $ 13.2 billion in 2007-08 as compared to US$11.7 billion in 2006-07. Indian IT and IT enabled services including R&D and Engineering services exports to the US were approximately US$ 24 billion in 2007. The total FDI equity inflow to India from the US during the period April 2000- June 2008 was US$ 5.4 billion. Trade and economic cooperation has emerged as an important pillar of India-US relations – evident in the rising bilateral trade volume and an enhanced interest to strengthen this trend. 

*All trade figures as per DGCIS , Kolkata 

On the basis of US Customs data, bilateral trade shows steady growth since 2004, as evident from the table below:

Source: US Bureau of Census 

India is one of the faster growing export destination for US exports. In 2007, the growth rate was 75%. It has slowed down in the first six months of the current year but is still a healthy 26%. Our main imports from the U.S. are aircraft and aviation machinery, other machinery, precious stones and metals, organic chemicals, optical and medical instruments. In 2008, export of fertilizers from the US has increased significantly. 

India’s exports to United States, though still significantly larger than our imports, are growing at a much slower pace. India’s major export products include gems and jewelry, textiles, organic chemicals and engineering goods. The rise in the value of rupee, hike in transport costs, competition from Bangladesh, Vietnam as well as some Latin American countries that have some duty advantages in textiles and apparel sector and the continuous bonding requirement imposed on shrimps since 2004 are the major factors contributing to the decline. 

US-bound investment from India has increased significantly since 2002, growing by about 75% on average per year. The value in 2006 is estimated to be about $2 billion and in 2007, the increase has been very rapid with announced Indian investments in US estimated at about $13 billion. The trend seems set to continue in 2008 with deals reported upto May 31 totalling more than $ 8 billion. 

High level visits: 

US Commerce Secretary Gutierrez visited India in February 2007 and US Trade Representative Ambassador Susan Schwab in April 2007. 

Finance Minister, Commerce Minister and Deputy Chairman Planning Commission visited USA to attend the Indo-US Economic Dialogue and Indo-US CEOs forum meeting in September 2007.

US Treasury Secretary Mr. Henry Paulson visited Indian in October 2007 to attend the annual Indo-US Financial Economic Forum meeting. 

Commerce and Industry Minister visited the USA for the Trade Policy Forum meeting in Chicago in February 2008. He again visited the US in May and June 2008 for WTO-related discussions.

Deputy Chairman Planning Commission visited USA for the Economic Dialogue meeting in April 2008. 

Proposed Agreements: 

· Bilateral Investment Treaty: After two rounds of exploratory talks on the proposed Bilateral Investment Treaty held in New Delhi in April 2008 and in Washington in June 2008, the two sides have decided to start formal negotiations. The dates for the same are being worked out.The treaty would be mutually beneficial as the US happens to be one of the largest foreign investors in India and Indian investments in the US are also growing at a fast rate. 

· Totalisation Agreement: Two rounds of informal discussions on the Indo-US social security cooperation to pave the way for negotiating a Totalisation Agreement between the US Social Security Administration and the Indian Ministry of Overseas Indian Affairs have taken place. The two sides have agreed to meet early to start negotiations on a Totalisation Agreement. A formal request in this regard has been made to the US Government. 

· Bilateral Aviation Safety Agreement: India has drawn up an action plan to fulfill the criteria for signing a Bilateral Aviation Safety Agreement with the USA. The Agreement will help the two sides to strengthen the ongoing partnership and would encourage US Aviation Companies to invest in India. 

Institutional mechanisms: The two sides have established several bilateral mechanisms to take forward the economic partnership. 

1. Indo-US Economic Dialogue: The Indo-US Economic Dialogue chaired by Deputy Chairman Planning on the Indian side and by Deputy National Security Advisor on the US side, met in Sept 2007 and in April 2008 and discussed ways to strengthen economic partnership. The next Economic Dialogue meeting would be held on 14 Oct 2008 in New York. 

2. Indo-US CEOs Forum: The Indo-US CEOs forum was formed in 2006 to provide the two Governments with private sector inputs for revitalizing the economic partnership. The Indo-US CEOs forum has submitted its second set of recommendations in April 2008 to both the Governments. Both Governments have prepared a list of feasible items based on the recommendations, which are being acted upon. The next Indo-US CEOs forum meeting would be held in New York on 14 October 2008. 

3. Trade Policy forum: The India-US Trade Policy Forum set up in 2005. meets at the Ministerial and Senior Official level. 

At the third Ministerial meeting of the Trade Policy Forum in June, 2006 in Washington the two sides agreed to create a senior-level Private Sector Advisory Group (PSAG) as an adjunct to the Trade Policy Forum that will provide strategic direction, input and support to the forum. 

The fifth Ministerial level meeting of the India-USA Trade Policy Forum took place on 19 February 2008 at Chicago, USA. A range of issues were discussed including the Social Security Agreement and Bilateral Investment Treaty between the two countries and providing market access for items of interest to both sides. 

The members of the PSAG also met on the sidelines of this Trade Policy Forum meeting and presented a ‘Vision statement’ to the Forum, which identifies key policy areas for engagement between the two countries and aims at furthering India-US economic partnership. 

4 Indo-US Commercial Dialogue: The India-United States Commercial Dialogue agreement was signed in March 2000 at New Delhi. Interactions under this Dialogue have been taking place from time to time to sort out concerns of both sides on bilateral commercial issues. The validity of this Commercial Dialogue has since been extended up to March 2010. The 2008 Work Plans under the India-US Commercial Dialogue agreed to include (i) Entrepreneurship Work Plan & (ii) US-India Standards Programme.

5. India-US Financial and Economic Forum: The Indo-US Financial & Economic Forum set up under the aegis of March 2000 Joint Declaration made by the Indian Prime Minister and US President has been holding its meetings regularly. It provides for a general framework for facilitating regular discussion on issues pertaining to financial sector developments, investment and macroeconomic policies. The Forum has annual Cabinet level meetings at Finance Minister/ US Treasury Secretary level and sub-cabinet level discussions. 

The fourth Cabinet level meeting was held on 30th October 2007 in New Delhi. Issues of mutual interest in areas such as Financial Services, Banking, Insurance, Pensions, Security & Corporate Bond Markets were discussed during the meeting. An Agreed Work Plan was worked out. The latest technical Financial and Economic Forum meeting was held in June 2008 in Washington. 

6. US-India Aviation Cooperation Programme (ACP): The bilateral civil aviation cooperation is being supported by the US-India Aviation Cooperation Programme(ACP) a public – private partnership between the US Trade Development Agency (USTDA,) the US Federal Aviation Administration (FAA),US aviation companies and the Indian Ministry of Civil Aviation. It provides a platform for unified communication between the Government of India and US public and private sector entities.
An India-US Steering Committee has been set up to take action on the ACP. The first meeting of the Steering Committee was held in October, 2007.The US-India Steering Committee has set up Working Groups on Air Worthiness, Flight Standards and Airports and Environment. An Air Traffic Flow Management (ATFM) seminar would be held in New Delhi in October, 2008 which is one of the projects identified under the ACP.

The USA is the partner country at the ‘India Aviation 2008’ being planned to be held in October 2008 in Hyderabad. 

7. Indo-US Information and Communication Technology (ICT) Working Group: The 6th Indo-US ICT Working Group held its meeting in Washington in June–July 2008. Bilateral issues concerning IT, ITES, E- Commerce and the broadcasting sector were discussed at the meeting. 

Trade Missions and Business Events:

· High level trade Missions led by the Governor of Minnesota and the Governor of Utah visited India in Sept-Oct 2007.

· An Infrastructure Summit was organized by the CEOs forum in Mumbai in Oct 2007. 

· Launch of Initiative- "Investing in America: The Indian Story"
· September 2007 – New York, USA by FICCI-US India Business Council (USIBC)with support of Ministry of Commerce and Industry, Government of India 

· An Indo-US SME Summit: Leveraging Global Supply Chains and Integrating the SME Community was held in Chicago in February 2008.

· An Indo-US Biopharma Summit was organized in Boston in June 2008.

· A US pharma and medical devices delegation visited Indian in September 2008.

· A renewable energy delegation from the USA led by Mr. David Bohigan, Deputy Assistant Secretary, and Department of Commerce visited India in January 2008 and in September 2008.

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