India and the US have multi faceted relations ranging from political, strategic to economic and commercial. India-US economic relations in the form of bilateral investments and trade constitute important elements in India-US bilateral relations particularly because India is now the second fastest growing economy in the world and USA is the world’s largest economy.
Economic Reforms introduced since 1991 have radically changed the course of the Indian economy and led to its gradual integration with the global economy. Benefits of the reform process are visible in the form of better growth rates, higher investment and trade flows and accelerated decline in income poverty. The effects of these reforms on trade and investment relations with the United States have been profound. USA is a major investing country in India in terms of FDI approvals, actual inflows, and portfolio investment. US investments cover almost every sector in India, which is open for private participants. India’s investments in USA are picking up. USA is also India’s largest trading partner. Since 2000, the two countries have been making efforts to strengthen institutional structure of bilateral economic relations by means of the “India-US Economic Dialogue” that aims at deepening the Indo-American partnership through regular dialogue and engagement.
U.S. is one of the largest foreign direct investors in India. A cumulative FDI inflow from USA till July 2008 was $7.96 billion. FDI inflows from USA constitute about 8 percent of actual FDI inflows into India in rupee terms. (Source : http://www.indianembassy.org/economic-relations.php)
Trade and commerce form a crucial component of the rapidly expanding and multi-faceted relations between India and US. From a modest $ 5.6 billion in 1990, the bilateral trade in merchandise goods has increased to $ 57.8 billion in 2011 representing an impressive 932.14% growth in a span of 21 years.
India’s merchandise exports to the U.S. grew by 19.88% from $ 7.93 billion during the period January- March 2011 to $ 9.50 billion in January- March 2012. US exports of merchandise to India also grew by 3.93% from $ 4.57 billion during the period January – March 2011to $ 4.74 billion in January – March 2012. India – US bilateral merchandise trade stands at $ 14.24 billion during this period. (Source : https://www.iaccindia.com/page.asp?pageid=269 / http://www.indianembassy.org/overview-of-india---us-bilateral-trade.php)
There are several areas where economic cooperation between India and the US can progress further. These include infrastructure, IT, Telecom sector, energy and other knowledge industries such as pharmaceuticals and biotechnology.
Closer economic ties in infrastructure sector can yield mutual benefits to both the countries. The Government of India is continuously reviewing its policies to create an investor friendly environment in sectors such as roads, ports and airports. Private sector participation in management, BOT projects, green-field airports, terminals and shipping berths and capacity augmentation has been initiated.
Delhi-Mumbai Industrial Corridor is a mega infra-structure project of USD 90 billion with the financial & technical aids from Japan, covering an overall length of 1483 KMs between the political capital and the business capital of India, i.e. Delhi and Mumbai.
Government of India has announced establishing of the Multi-modal High Axle Load Dedicated Freight Corridor (DFC) between Delhi and Mumbai, covering an overall length of 1483 km and passing through the six States - U.P, NCR of Delhi, Haryana, Rajasthan, Gujarat and Maharashtra, with end terminals at Dadri in the National Capital Region of Delhi and Jawaharlal Nehru Port near Mumbai. (Source : http://delhimumbaiindustrialcorridor.com)
India’s energy sector has been an important destination for US investment. The sector offers for exploitation a vast untapped potential to investors in hydro electricity, oil & natural gas and coal, Alternative sources of energy. Although several U.S. companies have been looking at the Indian energy market closely, progress has so far been limited. With the introduction of Central Electricity Act 2003, the government of India has now liberalized the power sector. Private sector participation is now allowed in generation, distribution and transmission. Considering the vast present and projected demand supply gap, there is tremendous potential for economic cooperation between the two countries in this area.
The US investor community is today increasingly sharing confidence in the future of the Indian economy. The growing synergy between the two countries in the technology sectors and mutually shared respect for democracy, rule of law and well established business practices make the two countries natural business partners.
The Indo-American Chamber of Commerce is organizing its flagship event – 8th Indo-US Economic Summit: Emerging Frontiers in Indo-US Economic Cooperation on 12-13 September 2012 at Hotel Le Meridien, New Delhi.