Tremendous Potential in Economic Partnership between US and India

Jul 4, 2010
Neil Gunn

US-India Bilateral Trade - Seemann

In a speech during the recent G20 summit in Canada, US President Obama reminded the audience of the importance of the US commercial partnership with India.

Despite the recent economic gloom the US hopes to increase bilateral trade with India, one of the world's fastest growing economies.

Newly released US government statistics show bilateral trade between the US and India grew rapidly from a modest start of $5.6 billion in 1980 to $43.8 billion in 2008. That’s an increase of 675% in 18 years.

However in the period January – August 2008, India’s merchandise exports to the US, in a reflection of global economic trends, fell by 20.51% from $17.11 billion to $13.6 billion in the same period in 2009.

Major Export Commodities From India to the U S (Jan-Aug 2009)

Textiles (24.6%)
Precious stones and metals (19.2%)
Iron and steel products (6.1%)
Organic chemicals (6.1%)
Machinery (5.3%)
Electrical machinery (5.3%)
Pharmaceutical products (7.5%)

In 2007-08 there were falls in diamond and jewelry and textile exports from India. Iron and steel exports held up, increasing from $1.23 billion in 2007 to $1.68 billion in 2008.

Major Export Commodities From the U S to India (Jan-Aug 2009)

Machinery (14.1%)
Aviation and Aircraft (14.7)
Precious stones and metals (13.3%)
Electrical machinery ((7.9%)
Fertilizers (7.3%)
Mineral fuel, Oil (6%)
Optical instruments and equipment (5.5%)

In 2007-08 there were falls in aviation machinery exports from the US to India from $3.6 billion in 2007 to $1.8 billion in 2008. Fertilizers held up, increasing substantially from $778 million in 2007 to $2.79 billion in 2008.

(Statistics courtesy of US Dept of Commerce, Bureau of Statistics)

US Investment in India

The US is the third largest source of Foreign Direct Investment (FDI) in India. Indian Ministry of External Affairs statistics show that US investment into Indian sectors increased from $502 million in 2004-05 to $1.8 billion in 2008-09.

The Sectors Attracting Most US Investment Are:

Fuels (Power and Oil refinery)
Telecommunications
Electrical equipment (including computer software and electronics)
Food Processing and service sector

According to the India Brand Equity Foundation (IBEF), Indian investment in the US in 2007-08 was an estimated $13 billion. The IBEF say this investment led to the creation of an estimated 65,000 jobs in the US, mainly in the steel, chemicals, hotel, and automobile sectors.

Despite the downturn in the first months of 2009, there is currently a mood of optimism, regarding economic ties between Washington and New Delhi. During the recent (22 June) India-U S CEO forum in Washington, designed to boost bilateral trade and investment between the countries, eight high level CEOs, nominated by their respective governments, agreed that there was, “tremendous potential and synergy in the economic partnership between India and the US.”

Further International Trade Reading:

Other sources used:

Embassy of India, Washington DC, website accessed 4 July 2010

Neil Gunn - Neil Gunn is a freelance writer and IT tutor and lives in the beautiful Scottish Borders. He has written for a range of publications in ...