India-U.S. Trade Relations in 2024-25

In 2024-25, the United States solidified its position as India’s largest trading partner for the fourth consecutive year. Bilateral trade reached $131.84 billion. Conversely, the trade deficit with China expanded , reaching $99.2 billion. This dynamic illustrates the evolving landscape of India’s international trade.

Trade Overview

The total trade between India and the U.S. was valued at $131.84 billion. This figure marks a substantial increase from previous years. In contrast, India’s trade with China reached $127.7 billion. This figure reflects a decline in exports to China, which fell by 14.5% to $14.25 billion.

Exports and Imports

India’s exports to the U.S. rose by 11.6%, amounting to $86.51 billion. Key exports included drug formulations, telecom instruments, and precious stones. Imports from the U.S. increased by 7.44% to $45.33 billion. Major imports included crude oil and electric machinery.

Trade Deficit with China

The trade deficit with China widened by 17%, from $85.07 billion to $99.2 billion. This increase is attributed to rise in imports, which grew by 11.52% to $113.45 billion. The contraction in exports indicates a shift in trade dynamics.

Historical Context

China was India’s top trading partner until 2021-22. The U.S. has held this title since then. Prior to China, the UAE was the largest trading partner. The changing landscape marks the shift in global trade relationships.

Future Prospects

Negotiations for a trade agreement between India and the U.S. are ongoing. The goal is to boost bilateral trade to $500 billion by 2030. This ambitious target reflects the growing economic ties and mutual interests of both nations.

Major Trading Partners

Following the U.S. and China, the UAE ranked third with $100.5 billion in trade. India’s trade with the UAE continues to be , reflecting its strategic importance in the region.

Sectoral Contributions

Key sectors driving India’s exports to the U.S. include pharmaceuticals, textiles, and precious metals. The import sector is dominated by energy resources and machinery. This diversification illustrates India’s growing industrial capabilities.

Trade Balance Analysis

India enjoys a trade surplus with the U.S. of $41.18 billion. This surplus is an essential aspect of the economic relationship, providing India with a favourable balance in its trade dealings.

Impact of Global Trends

Global economic trends, such as shifts in supply chains and geopolitical tensions, influence trade dynamics. The U.S.-China trade relationship also affects India’s positioning in global markets.

Technological Advancements

Technological collaboration is becoming increasingly important. Both nations are exploring opportunities in sectors such as information technology and renewable energy.

Investment Opportunities

The growing trade relationship opens avenues for investment. Both countries are keen on enhancing cooperation in various sectors, including defence and technology.

Questions for UPSC:

1. Discuss the implications of India’s trade surplus with the United States on its economy.
2. Critically examine the factors contributing to the widening trade deficit with China.
3. Explain the historical evolution of India’s major trading partners over the past decade.
4. With suitable examples, discuss the role of technology in enhancing India-U.S. trade relations.

Answer Hints:

1. Discuss the implications of India’s trade surplus with the United States on its economy.

1. Trade surplus of $41.18 billion strengthens India’s economic position.
2. Enhances foreign exchange reserves, providing stability to the Indian Rupee.
3. Encourages investment in export-oriented sectors, boosting job creation.
4. Fosters positive diplomatic relations, leading to strategic partnerships.
5. Supports economic growth by increasing revenue from exports and reducing reliance on imports.

2. Critically examine the factors contributing to the widening trade deficit with China.

1. Increase in imports from China by 11.52%, reaching $113.45 billion.
2. Decline in exports to China by 14.5%, indicating reduced demand for Indian goods.
3. Dependence on Chinese products, especially in electronics and machinery.
4. Geopolitical tensions affecting trade negotiations and cooperation.
5. Shift in global supply chains, leading to increased imports from China.

3. Explain the historical evolution of India’s major trading partners over the past decade.

1. China was the top trading partner from 2013-14 to 2017-18 and in 2020-21.
2. The U.S. became the largest trading partner in 2021-22, reflecting strategic shifts.
3. The UAE was previously the largest partner before China’s rise.
4. Trade dynamics have changed due to geopolitical factors and economic policies.
5. India’s diversification strategy aims to reduce dependence on any single country.

4. With suitable examples, discuss the role of technology in enhancing India-U.S. trade relations.

1. Collaboration in information technology drives growth in service exports.
2. Joint ventures in renewable energy promote sustainable trade practices.
3. Technological advancements in pharmaceuticals enhance export capabilities.
4. Data analytics and AI improve supply chain efficiencies and market access.
5. Investment in R&D encourages innovation, leading to competitive advantages.