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Indo-US Ties: Economics & Strategy

Context:

Prime Minister of India heads to the United States for an official state visit on the invitation of President Joe Biden. This visit highlights the bipartisan consensus in Washington to strengthen the bilateral relationship.

Relevance:

GS II: International Relations

Dimensions of the Article:

  1. Economic Engagement
  2. Strategic Underpinnings
  3. Challenges

Economic Engagement:

  • The Indo-US strategic partnership focuses on deepening economic engagement and elevating the bilateral relationship to a “global strategic partnership.”
  • The value of trade between the two countries has reached a record $191 billion, making the US India’s largest trading partner.
  • India enjoys a favorable balance of trade position with the US, which is comforting considering its adverse balance with other major trading partners.
  • American companies have invested approximately $60 billion in sectors such as manufacturing, telecommunications, consumer goods, and aerospace in India.
  • Indian companies have invested over $40 billion in sectors like IT, pharmaceuticals, and green energy, creating 425,000 jobs across various states in the US.
  • The purchase of more than 200 Boeing aircraft by Air India, announced in February, is expected to support over one million American jobs and is seen as a significant achievement.
Importance of Visit:
  • Prime Minister Modi’s visit to the US is seen as a crucial step in strengthening the bilateral relationship.
  • The visit will solidify the “defining relationship” of the 21st century, as described by President Biden.
  • The economic ties between the two countries, including trade, investments, and job creation, highlight the significance of the visit and the positive trajectory of the relationship.

Strategic Underpinnings:

  • The Indo-US relationship has strategic underpinnings, with a focus on countering China’s influence and diversifying supply chains.
  • The Quadrilateral Security Dialogue (Quad), consisting of India, the US, Australia, and Japan, serves as a strategic partnership aimed at countering China’s growing influence in the Indian Ocean rim and focusing on the Indo-Pacific region.
  • The I2U2, a grouping of India, Israel, the US, and the United Arab Emirates, focuses on joint investments and initiatives in various sectors such as water, energy, transportation, space, health, and food security.
  • The US and India have launched initiatives on Critical and Emerging Technologies, semiconductor supply chain resilience, and chip manufacturing.
  • The semiconductor manufacturing agreement holds the potential for India to play a more central role in the global electronics supply chain and benefit from collaborations with established chip firms.
  • The defence sector is expected to see multiple agreements, building on the existing cooperation framework. This includes the possibility of India manufacturing GE’s F414 turbofan jet engine under license for the indigenous Tejas Mk2 light combat aircraft.

Challenges

  • The US export controls on India and the need for technology transfer clearance from Congress pose challenges to the free transfer of technology.
  • Trade issues such as visa delays and the revoking of India’s trade benefits under the Generalised System of Preferences (GSP) program in 2019 need resolution. The US has raised concerns about India’s protectionist trade policy and entry barriers for foreign investment.
  • The increasing procurement of discounted crude oil from Russia by India raises questions about its partnership with the US. However, the US has overlooked this issue so far, despite imposing price caps on Russian oil products by G-7 countries.
  • India may be encouraged to join the trade pillar of the US-led Indo-Pacific Economic Framework (IPEF) as a substitute for a full-scale free trade agreement (FTA) with the US. However, India has reservations about the commitments required in areas such as environment, labor, digital trade, and public procurement.
  • India’s exclusion from the US-led Minerals Security Partnership (MSP), aimed at securing critical mineral supply chains and reducing dependency on China, has caused concern within sections of the Indian government. Italy has been included as a new member of the partnership.
    • The MSP is considering collaborative projects, including the development of a critical minerals and metals cooperation forum, battery materials, and a minerals processing facility in South America.

-Source: Indian Express


May 2024
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