Over the years, bilateral relations between India and the United States have expanded beyond trade and investments. Based on shared interests in bilateral, regional, and global issues, the United States has become India's leading trade partner, as evidenced by the volume increase from pre-pandemic to post-pandemic times.
Thursday's report by the PHD Research Bureau of the PHD Chamber of Commerce and Industry projected that India-U.S. trade will reach $300 billion in 2026-27, up from its present level of USD 188 billion in 2022-23.
The volume of exports (goods and services) from India to the United States will increase from USD 82 billion in FY 2018-19 to USD 111 billion in FY 2022-23, according to the report titled "The India-US Bilateral Relations: Steady Steps into the Future."
According to the industry group, the volume of imports (goods and services) from India to the United States will increase from USD 58 billion in FY 2018-19 to USD 76 billion in FY 2022-23.
"India and USA, the two largest democracies are not only collaborating closely in trade but also possess common interests in promoting global economic prosperity which is evident from the strong bilateral cooperation between them in forums like G20, Quad, and Indo-pacific economic framework for prosperity (IPEF), said Saket Dalmia, President, PHD Chamber of Commerce and Industry.
Dalmia lauded the all-time high level of cooperation between India and the United States in a variety of fields, including commerce, investment, diplomacy, education, etc. He stated that these relationships must expand in order to provide comprehensive assistance to the SMBs that will become MNCs in the future.
With cumulative foreign direct investment (FDI) equity inflows of close to USD 60 billion from April 2000 to March 2023, the United States is the third largest foreign investor in India. During FY2022-23, India will receive approximately USD 6 billion in FDI equity investments from the United States.
Given the enormous size of the Indian market, a number of major US companies operate in India in sectors such as manufacturing, agriculture, information technology, and retail, among others, while significant Indian companies in the United States include Reliance, HCL Technologies, Infosys, TCS, and Wipro, among others.
"Going ahead, India’s continued improvement in the ease of doing business rankings and path-breaking reforms agenda offers extensive opportunities to invest in a variety of sectors and will attract a large chunk of investments from the USA considering the growing interest of American businesses in the Indian economy," the report added.
Due to the sustained spread of the pandemic Covid-19, the global economy experienced its deepest downturn since the Great Depression (in the 1930s). The containment measures and associated disruptions to the global supply chain had a significant impact on economic activities and created an unprecedented level of uncertainty in nearly every country on the planet.
Multiple global organisations evaluated the economic effects of Covid-19 on global growth, trade, and investments, revealing a persistently bleak future outlook. Post-pandemic, although major macroeconomic indicators are witnessing an uptick across many economies on account of the easing of Covid-19-related lockdown restrictions, there remain downside risks to the speedy recovery of global economic health.
Minister Counsellor for Economics, Environment, Science and Technology at the United States Embassy in India, Drew Schufletowski, applauded the upward trend observed in bilateral trade and relations between India and the United States. In turbulent times, India plays a crucial role in strengthening global supply channels, he added.
A full-fledged free trade agreement (FTA) in goods and services between India and the United States can serve as the basis for a more liberal trade regime for both countries, provide a significant breakthrough in India-US bilateral relations in the coming years, and promote greater global economic prosperity and stability, according to the report.
"The successful completion of the India-USA FTA can therefore function as an efficient framework to allow further liberalisation of trade in goods and services, both bilaterally and multilaterally and address challenges connected to high tariffs and intricate non-tariff measures," it added.
In light of the global economic downturn, the International Monetary Fund (IMF) forecasts that India's economy will expand by 6.1% in 2023, up 0.2 percentage points from April's estimate.
In its World Economic Outlook, the international body said that growth in emerging and developing Asia is on track to rise to 5.3 per cent in 2023, then to 5.0 per cent in 2024, showcasing a 0.1 percentage point downward revision for 2024.
Suman Bannerjee, CIO, Hedonova, a US-based hedge fund said that India's GDP will rise due to strong tech and service sector growth, increased foreign investment, favourable demographic dividends, governmental policy reforms facilitating business, and a predicted recovery in consumer spending post-Covid-19, contributing to a healthier overall economic outlook.
"The forecast of 6.1 per cent is pessimistic, I expect it to be 6.3 per cent. A weak rupee has fostered more exports which have reduced the current account deficit and increased remittance income from USD 55.6 billion to USD 62.3 billion," Bannerjee added.
Bannerjee mentioned that oil prices have been lower due to purchases from Russia and Iran over Norway, the USA and Saudi Arabia and overall lower oil prices have kept the balance of payment account in check.
IMF stated, in reference to the global economy, that the recovery from the Covid-19 pandemic and Russia's invasion of Ukraine is sluggish due to growing disparities between economic sectors and regions. Notably, it is anticipated that global growth will decline from an estimated 3.5% in 2022 to 3.0% in both 2023 and 2024.
While the outlook for 2023 is marginally more optimistic than what was projected in the April 2023 world economic outlook (WEO), it remains poor relative to historical norms. The rise in central bank policy rates to fight inflation continues to weigh on economic activity. IMF added that global headline inflation is anticipated to decline from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.
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