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A day after signing a defence agreement that would make joint operations between their militaries easier and efficient, the US and India kicked off a two-day strategic and commercial dialogue in New Delhi on Tuesday. The world’s two largest democracies are keen to boost their bilateral trade —which currently stands at $109 billion — to $500 billion. They look to be on the right track. The US investment in India zoomed to $28 billion last year.
Indian investment in the US also went up to $11 billion.
The US is not just the second largest trading partner of India, it is also the largest investor in the South Asian country. The main US sectors which India currently taps are defence, aviation, aerospace, energy and infrastructure development and manufacturing. A new area where US is investing in India is railways. GE has pumped in over $200 million for a locomotive-manufacturing plant near Bihar. India too has shifted from its conventional tea and garments exports to the US. Its information technology services sector has taken strides in the US. Indian pharmaceutical firms are also doing brisk business in generic drugs there.
Despite the huge potential that the trade interactions hold, there are bottlenecks that the two countries are facing in consolidating their bilateral ties. While the US government’s restrictive visa policy poses a big challenge, India’s poor business environment puts off many investors. It is imperative that both take steps that help traders to break these barriers. The US has to ease its visa policy and India has to ease the business climate. New Delhi has taken initiatives to open up its sectors to foreign companies and is simplifying regulations. Recently, it passed the Goods and Services Tax (GST) Bill which will replace some 17 different taxes and club them together into a single tax. It is hoped the GST will clear a lot of hurdles for the foreign investors. US-based insurance and pension funds can also invest in India’s newly-created National Investment and Infrastructure Fund (NIIF). On its part, the US should remove caps that hinder visa access.
Harmonizing of product standards should be the focus as the US-India trade gains momentum. Standards will decide the bilateral relations and be a key driver in enhancing them amid the growing competitiveness in the world market.
The US and India must realize that they can be strategic partners and take their ties to a new level. While giving their trade a structured shape, they have to explore new areas of growth. Transferring of clean technology is one area that needs to be tapped by the US. India can gain from the renewable energy projects for environmental sustainability. Another area could be travel and tourism where the two can get engaged. Currently, over 1 million people travel between the two countries each other. Increasing the number of travellers will be a big commercial opportunity.
Both the US and India have to develop an economic vision that facilitates trade and brings about an economic connectivity between the two nations. Right policies can blur the geographical distance.