Josep
Following global COVID-19 pandemic era economic trends, bilateral U.S.-India trade in goods and services contracted from $145.9 billion in 2019 to $121.8 billion in 2020. Moreover, Indian GDP declined by eight percent (compared to 4.2 percent growth in 2019). India was the United States’ 12th largest trading partner with sales of goods worth $44.8 billion in 2020. The United States remained India’s largest trading partner, with exports of goods to the United States worth $77 billion. For years, the United States has had a persistent trade deficit with India ($23.8 billion in 2020). U.S.-India trade is making up lost ground in 2021, with a 49.4 percent increase in U.S. goods exports to India year-to-date in July, compared with a 28 percent contraction in the same period in 2020. The Indian economy is projected to grow by 7.2 percent in 2021.
Indian-origin foreign direct investment (FDI) into the United States was valued at $12.7 billion in 2020, a slight decrease of $179 million from the previous year. As of 2020, India’s direct investment in the United States supported over 70,000 U.S. jobs. Newly announced Indian FDI projects were clustered in the software and information technology services, business services, pharmaceuticals, and industrial equipment sectors. U.S. FDI into India was valued at $41.9 billion in 2020; however, much U.S. investment enters India from third-country destinations.
Most major U.S. companies are active in the market. The Indian government has promoted the concept of “self-reliance” as a means to develop and support Indian businesses and employment, which is making it more difficult for U.S. companies to sell their goods and services in India. This is particularly true for Indian Government procurement when Indian equivalents are available. U.S. exporters may also be pressured to start manufacturing their products locally to retain market access, particularly if similar goods are not produced in India. As part of its self-reliance movement, India has enacted various market access barriers in the form of tariffs, localization requirements, indigenous standards requirements and labelling practices, price controls, and import restrictions.
The aforementioned market challenges notwithstanding, India offers significant opportunities for U.S. companies, and the potential to increase bilateral trade is enormous. Indian conglomerates and high technology companies are generally equal in sophistication and prominence to their international counterparts, and in certain industrial sectors—such as information technology, telecommunications, pharmaceuticals, textiles, and engineering—are globally recognized for their innovation and competitiveness. U.S. companies operating in India emphasize that success requires a long-term planning horizon and a state-by-state strategy to adapt to the complexity and diversity of India’s regional markets.
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