In recent news, the Ministry of Commerce and Industry unveiled data which indicated that America has dethroned China to become India’s leading trade affiliate for the fiscal year 2021-22. This report disclosed that significant goods being exported from India to the United States include petroleum, polished diamonds, pharmaceutical medications, jewellery, and frozen shrimp. As for imports, America mainly supplies petroleum, rough diamonds, liquified natural gas, gold, coal, waste and scrap, and almonds among others. Interestingly, China was India’s primary trade ally between 2013-14 and 2017-18 and also during 2020-21. Prior to the Chinese era, the United Arab Emirates held the position of India’s largest trading partner.
Key Points about India-US Trade
For the fiscal year 2021-22, bilateral trade between India and the United States reached a whopping USD 119.42 billion, significantly higher than the USD 80.51 billion recorded in 2020-21. It was observed that exports to the United States climbed to USD 76.11 billion from the preceding year’s USD 51.62 billion, while imports escalated to USD 43.31 billion from about USD 29 billion in 2020-21. India currently enjoys a trade surplus with the United States – a rarity considering India’s trade relationships with most countries.
Comparison with India-China Trade
During the same period, the total commerce between India and China amounted to USD 115.42 billion, against USD 86.4 billion in the previous year. Interestingly, exports to China showed only a marginal increase from USD 21.18 billion in 2020-21 to USD 21.25 billion last fiscal year. However, imports from China saw a substantial leap, soaring to USD 94.16 billion from approximately USD 65.21 billion in 2020-21.
Factors Influencing the US Becoming India’s Largest Trading Partner
Several factors have led to this shift in trade relations. First off, global firms are gradually reducing their dependence on China and diversifying their operations into other nations such as India. Second, India’s recent inclusion in a US-led initiative to establish an Indo-Pacific Economic Framework (IPEF) has given a boost to economic ties. The US has always been India’s largest market for service exports, but in recent years, overseas sales of merchandise goods to America have surpassed those to China.
Recent Developments in India-US Relations
The present bilateral partnership between India and the US covers a broad range of issues including pandemic response, post-pandemic economic recovery, climate crisis and sustainable development, emerging technologies, supply chain resilience, education, diaspora, defence, and security. Despite some contradictions in responses towards global crises like the Russia-Ukraine conflict, both countries continue to build on recent momentum.
Challenges in India-US Relations
There are some obstacles, however, in the path of further strengthening India-US ties. For instance, in 2018, heightened tariffs were imposed on certain products exported to the US from India, leading to a retaliatory increase in tariffs by India on select US imports. Self-reliance initiatives like the Atmanirbhar Bharat Campaign have also contributed to misunderstandings between the two nations. Other challenges include the US’ hostility towards India’s traditional allies like Iran and Russia, and differing policies on issues like Afghanistan.
Way Forward
Despite these challenges, the future holds immense possibilities, with opportunities for technology transfer, manufacturing, trade, and investment expansion. As the international system undergoes an unprecedented transformation, India is emerging as a key player. The strategic partnership between India and the US is maturing, and differences are being managed through continuous dialogue and conversion into opportunities. It is in both countries’ interests to maintain cooperation in security areas even as newer areas of collaboration, such as space governance, become increasingly important.
