The Confederation of Indian Industry (CII) in association with US India Business Council (USIBC) today launched ‘$500 Billion Roadmap’, a report that provides an assessment of current trends in U.S.-India trade and the policy reforms needed to set business ties on a faster growth trajectory. Specifically, the report has listed out 13 policy interventions to help boost trade between the two economies. The report also includes several case studies of “green field” growth potential in areas outside of the traditional industry verticals, apart from headlining three scenarios to reach the $500 billion target in bilateral trade.
“There is increased focus on fostering greater synergies in the economic relationship between India and US. This is evident from the fact that the two-way trade between India and US has grown at an impressive compound annual growth rate (CAGR) of 11.8% over the last two decades”, said Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry. “However, to achieve the shared goal of reaching US$500 billion in trade from the current US$142 billion in 2018, would require renewed focus on tackling some of the irritants to unleash the full potential of the economic relationship”, he added.
“This report undertaken by CII and USIBC outlines the steps needed to facilitate greater trade and opportunity sectors that can unleash USD 500 billion in two way trade between the U.S. and India. We have seen trade grow by over 50 percent in the past 5 years. But in order to see a doubling and tripling of the trade relationship, the two countries must work out a trade deal that can open markets in both directions”, said Ms Nisha Biswal, President, USIBC.
Aside from trade, investment ties between the two economic behemoths also remain solid—cumulative US foreign direct investment (FDI) into India amounted to roughly $44.5 billion in 2017, 15.1% jump from 2016. However, in order to boost investment levels further, additional steps are required by the Indian policymakers in the form of further streamlining & simplifying the Single Window Clearances, instituting a mechanism of Automatic Deemed Approvals for NOCs, further liberalization of FDI norms among others.
The report has been launched at an opportune time, when there is a significant opportunity to give a major fillip to the U.S.-India relationship, given the trade tensions with China. Many U.S. companies are actively exploring alternative investment destinations to relocate their manufacturing supply chains—with India as a competitive destination. However, for this to materialize, both sides have to look at the challenges in the relationship as opportunities for growth and look for creative solutions to break the logjam wherever possible.
The report has listed out interventions in 13 specific areas which if resolved, will provide a significant thrust to trade between the two countries by turning challenges into opportunities. The interventions range from reinstating Generalized System of Preferences (GSP) benefits by US for India, bringing down import duties on high end motorcycles to 0%, arriving at a consensus on a pricing mechanism for medical devices, modifications in India’s E-Commerce Policy, removing high tariffs on steel & aluminum imports by US, fostering greater cooperation in strengthening partnership in defence & aerospace among others.
Further, in the report, USIBC and CII have identified few areas where emerging market segments, technologies and collaborative ventures can yield benefits for U.S.-India trade, as well as help tackle global development challenges. These niche sectors include the following: (i). Harnessing the Blue Economy by expanding trade in maritime and marine activities, (ii). Pushing the Sports Economy by tapping tthe opportunities presented in promoting US-India engagement in sports activities, (iii). Greater collaboration in Space industry, (iv). Capitalising on the immense potential of the US-India tourism scenario and (iv), Focusing on collaborating in the areas of sustainability and environment.
Specifically, the report has also laid out the following three possible scenarios for pushing the India-U.S. trade to the envisaged US$500 billion target from the current print of US$142 billion in 2018.
1). The ‘Limping’ scenario assumes a deterioration in the India-U.S. trade relationship. Accordingly, bilateral trade grows at a CAGR of 3.9% over the next several decades, crossing the $500 billion mark only in 2052.
2). Under the ‘Chugging’ scenario, the bilateral trade relationship and key drivers of economic growth largely remain unchanged from the current status quo, bringing the bilateral relationship to $500 billion by 2035. The implied growth rate is 7.9% over the 2019–2035 period.
3). The ‘Soaring’ scenario assumes positive policy and regulatory moves and a significant increase in positive trade engagement, bringing bilateral trade growth to 11.8% and reaching the $500 billion mark by 2030.