Economic Reforms introduced since 1991 have radically changed the course of the Indian economy and led to 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.
TRADE
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Though, the trade between the United States and India is relatively small, it has risen sharply over the years.
In terms of India's major trading partner, USA continues to lead. However, India's share in US trade is 24th in US export and eighteenth in US imports. The two countries have been making efforts to strengthen institutional structure of bilateral economic relations. Signing of "India-US Economic Dialogue" by Indian PM AB Vajpayee and US President Bill Clinton in 2003, aims at deepening the Indo-American partnership through regular dialogue and engagement. |
India's sizable population and growing middle and higher income class makes India a potentially large market for U.S. goods and services. According to the figure from government sources, U.S. exports to and imports from India in 2003, totalled US $5.0 billion and US $13.1 billion, respectively.
India's main exports to US are precious stones, metals (worked diamonds & gold jewellery), Woven apparel, Knit apparel, miscellaneous textile article, Fish and seafood (frozen shrimp), Textile floor coverings, Iron/steel products, Organic chemicals and Machinery (taps, valves, transmission shafts, gears, pistons, etc)
India imports sophisticated machinery (computers and components, gas turbines, telecom, etc), Electrical machinery (recording/sound media),
Medical and surgical equipment/instruments, Aircraft, spacecraft (small aircraft), Precious stones, metals (diamonds, not mounted or set), jewellery, Organic chemicals, Plastic, Cotton and cotton waste and Wood pulp, etc.
INVESTMENT
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United States is India's second largest source of FDI (after Mauritius), accounting for or 16% of total FDI flows to India from 1991 through July 2001. USA has 17.08% share in FDI inflows to India, While Mauritius is at top with 34.49% and Japan comes 3rd with 7.33% share.
On investment front, USA covers almost every sector in India, which is open for private participants.
Both government-to-government level and business-to-business level conduct regular interactions with each other to promote and strengthen the trade and economic interactions between the two countries. |
The US investor community is today increasingly sharing confidence in the future of the Indian economy.
Several areas like infrastructure, IT, Telecom sector, energy and other knowledge industries such as pharmaceuticals and biotechnology, possess immense potential for progressing economic cooperation between India and the US.
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.
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|
U.S. Direct Investment Abroad |
Foreign Direct Investment in the United States |
| |
|
All countries
($ mln.) |
India
($ mln.) |
(India's % share in total) |
All Countries
($ mln.) |
India
($ mln.) |
(India's % share in total) |
| Direct investment position on a historical-cost basis |
2002 |
1,520,965 |
3678 |
0.24 |
1,347,994 |
280 |
0.0002 |
| Capital outflows (inflows (-) ) |
2002 |
119,742 |
904 |
0.75 |
30032 |
22 |
0.0007 |
| Income |
2002 |
123889 |
325 |
0.26 |
38,821 |
6 |
0.0002 |
Source :- Website of the Bureau of Economic Analysis of the US Department of Commerce.
Among the
major multi national corporations of USA that are doing a profitable business in India are- General Electric, Whirlpool Ford (India), 3M, Tecumseh Products (India) Limited, Pepsi, Proctor and Gamble (India), Microsoft, Intel, IBM Corporation, EDS, Sun Microsystems, Adobe Systems Inc, Agilent Technologies Inc, Oracle Corporation, Texas Instruments.
FDI in banking is permitted up to 49%. US Success stories in this sector include Citicorp, GE Capital, and American Express. The insurance sector in India is opened up for up to 26% FDI. However, there are proposals to hike this limit to 49%. US companies that have successfully entered this field in India include New York Life, AIG and Chubb.
A very important aspect of US India economic relations comes with the
emergence of Business Process Outsourcing, where in many US companies are reaping the advantages offered by India's IT sector. India offers a large pool of trained, English speaking personnel, which offers huge cost benefits to the US MNCs.
Several big names like, American Express, Citicorp, Microsoft, Dell, Hewlett-Packard, HSBC, Standard Chartered and Convergys etc are taking advantage of the opportunities offered by India's IT Sector. Other
Fortune 500 companies such as Morgan Stanley, AT&T, Reebok, GM, Fujitsu, Boeing, Pepsi, Swissair, Coca-Cola and British Airways have identified India as their outsourcing partner. Many more corporations across the globe are following suit.
In the coming
India Telecom - an international business conference focusing on India's telecom industry - scheduled for May 18-19 at Washington DC, Indian telecom companies will present market information about products and services, administrative initiatives to the US suppliers. Amongst major US companies that have entered the Indian market are AT&T and Qualcomm. In addition, in the realm of biotechnology, many US companies are operating their business.
In recent years India has also made progress in expanding their investment base in the United States of America. When a few years back India was struggling to meet the quickly-changing demands of the global marketplace, today, it has joined the ranks of countries whose economies are on the upswing.
India's UB has bought breweries in the US while companies such as Dr. Reddy's Laboratories and Ranbaxy have bought pharmaceutical manufacturing units in the US. In the IT sector, Tata Infotech, Sathyam, Infosys and WIPRO have large operations based in the US. Wipro India announced, November 12th, that it had entered into a definitive agreement to acquire the global energy practice of American Management Systems for an aggregate consideration of $26 million, payable in cash. The move strengthens Wipro's end-to-end IT solutions capability in the energy and utilities market.