India-US Trade and Strategy

Context:  At the heart of the Indo-US strategic partnership is deepening economic engagement between two countries.

Probable Question: Q. Analyze the strategic underpinnings of the Indo-US relationship with a focus on economic engagement.

Image Source: The Indian Express

Economic Engagement:

• Growing Trade Relationship: Indo-US bilateral trade has reached a record high of $191 billion, making the US India’s largest trading partner.
  • For the US, India is the ninth largest trading partner.
• Foreign Direct Investment (FDI): American companies have invested around $60 billion in India, while Indian companies have invested more than $40 billion in sectors such as IT, pharmaceuticals, and green energy.
• Strategic Deals: Air India announced the purchase of more than 200 Boeing aircraft that would “support over one million American jobs.

Strategic Underpinnings:

• Quadrilateral Security Dialogue (Quad):
  • The Quad, comprising India, the United States, Australia, and Japan, was initially established after the 2004 Indian Ocean tsunami but gained strategic significance in 2017.
  • The Quad primarily serves as a counter to China’s growing influence in the Indian Ocean rim and focuses on strengthening the Indo-Pacific region.
  • It acts as a forum for the four countries to enhance cooperation and address regional challenges.

• I2U2 Grouping:
  • The I2U2 grouping consists of India, Israel, the United States, and the United Arab Emirates.
  • This grouping is dedicated to joint investments and new initiatives in various sectors, including water, energy, transportation, space, health, and food security.

• US-India Initiative on Critical and Emerging Technologies:
  • In January 2023, National Security Advisor Ajit Doval and his US counterpart Jake Sullivan launched this initiative.
  • The partnership focuses on critical and emerging technologies, aiming to enhance India’s role in the global electronics supply chain.
  • The collaboration includes efforts to align India’s chip manufacturing incentive scheme with other global initiatives, mainstreaming foreign chip firms and industry leaders.
  • It also seeks to avoid duplication of efforts and diversify the sourcing supply base for semiconductor chips.

• Defence Sector Cooperation:
  • Building upon the existing bilateral cooperation framework, multiple pacts are expected in the defence sector.
  • Cooperation may involve areas such as armoured vehicles, ammunition, and air combat.
  • One potential deal is for India, the largest arms importer globally, to manufacture under license GE’s F414 turbofan jet engine for the indigenous Tejas Mk2 light combat aircraft.

Challenges in the US-India relationship include:

• Export Controls and Technology Transfer: The US has significant export controls on India, which were instituted after India’s 1998 nuclear test. 
  • These controls inhibit the free transfer of technology between the two countries.
  • Resolving this issue is crucial to fostering greater collaboration and technological exchange.
• Trade Issues: These include visa delays and the revoking of India’s trade benefits under the Generalized System of Preferences (GSP) program in 2019. 
  • The US has raised concerns about India’s trade policy being protectionist and the existence of entry barriers for foreign investment.
• Oil Procurement from Russia: India’s increasing procurement of discounted crude oil from Russia has raised questions about the contradiction between India’s partnership with the US and its reliance on Russian oil.
• Indo-Pacific Economic Framework (IPEF): The US may encourage India to join the trade pillar of the US-led IPEF.
  • India has already committed to three pillars of the IPEF but has reservations about the trade pillar due to concerns related to the environment, labor, digital trade, and public procurement commitments.
• Minerals Security Partnership (MSP): India has faced challenges in finding entry into the US-led MSP, which aims to secure supply chains of critical minerals and reduce dependency on China.
  • The partnership was floated last year, and has now been expanded to include a new member, Italy (along with the 11 founding countries and the European Union).
  • This exclusion raises concerns within certain sections of the Indian government.

Conclusion:

• Indian PM’s state visit to the US highlights the deepening economic engagement and strategic cooperation between the two countries.
• With a focus on countering China’s influence, expanding bilateral trade, and addressing key challenges, both nations aim to elevate their relationship to a global strategic partnership.

Additional Information: About iCET: The Initiative on Critical and Emerging Technologies is a framework agreed upon by India and the U.S. for cooperation on critical and emerging technologies in areas including artificial intelligence, quantum computing, semiconductors and wireless telecommunication. It was launched in January 2023 to strengthen their strategic partnership and drive technology and defence cooperation. Under it, the United States and India affirm that the ways in which technology is designed, developed, governed, and used should be shaped by our shared democratic values and respect for universal human rights. Focus areas of the initiative: Trusted technology partners: The iCET seeks to position New Delhi and Washington D.C. as trusted technology partners to build supply chains and support the co-production and co-development of items. Key takeaways: Setting up a research agency partnership to drive collaboration in areas like AI and developing common standards in AI. Developing a new defence industrial cooperation roadmap to accelerate technological cooperation for joint development and production. Developing a roadmap to accelerate defence technological cooperation and innovation bridge to connect defence startups. Supporting the development of a semiconductor ecosystem. Strengthening cooperation on human spaceflight. Advancing cooperation on development in 5G and 6G. Adopting OpenRAN network technology in India.

 News Source: The Indian Express