The United States of America has recently become the largest trading partner of India. As per data of ministry of commerce, in the FY 2018-19, the value of bilateral trade between India and the USA was US$ 8.95 billion whereas the corresponding value between India and China was at US$ 87.07 billion. With more strengthened economic ties between Washington and New Delhi, the trade volume and value have been predicted to go upwards. As per data available on the USA government website on foreign trade, in the year 2019, the total exports from the USA to India stood at around 34288 million US $, and the total imports from India to the USA stood at around 57694 million US $. Hence from the Indian perspective, the trade with the USA had a surplus value for India in the year 2019. In the year 2020, until May the export from the USA to India stands at around 1127 million US$ and the imports from India to the USA sums up to around 19408 million US$. This shows that the confidence of the various officials, observers, and analysts in the bright future of India-USA economic relations is not misplaced.

The deepened and strengthened ties between USA and India gains more relevance in the pandemic scenario when the whole world is flustered and upset with China over the way Covid19(origin country: China) has grappled the entire globe. Some observers draw out the idea of a world where China has been replaced by India in terms of being the next manufacturing hub for the world. This may be a more than a farfetched idea. Phrases like ‘India set to replace China’ has been part of self-satisfying AC-room presentations of various research groups (whose only realized purpose is making such presentations) working in New Delhi for the past 10 years. People who are harping on this ‘India replacing China’ would be flummoxed if they find out the actual advantageous price differential offered by China in the world market.

For example, one kilogram of BR category steel would cost around 52-55 rupees from SAIL. It would cost around 50 rupees plus Rs 2 for shipping purposes from any standard Russian steel manufacturer, whereas the same quality of steel can be obtained from China at around 17 Rs per Kg. Industry players in China are being helped by their government to set up an efficient supply chain to acquire raw materials in a hub and spoke model. It allows their firms and factories to get their raw materials sourced from as near as 500 m to 1.5 km. This distance advantage, cheap labor, and government subsidies get reflected in the competitive price which they offer in the world. So, ‘India replacing China’ is a notion that is out of sight at least as of now. But it is not an impossible idea.

India and the USA can come together to join their expertise and a vast amount of resources to build competitive advantages in many industries. That can be done successfully if and only if the unnecessary bureaucratic maze is removed from the business environment within India. this maze can be realized if one tries to set up a factory in India as simple as the one manufacturing nails. In the year, 2005, the India-US trade policy forum was established to take ahead talks in economic cooperation into the realm of concrete action. Some of the primary areas of economic cooperation-based relations between Indian and the USA have been agriculture, pharmaceuticals, textiles, telecommunication, IT, and energy. Textile products (nonknitted), used textile materials, pharmaceutical products, precious stones are some of the most prominent items in the Indian export basket for the USA. Export from the USA to India comprise mainly of fuels and aircraft. The year 2009 was a milestone as in that year a Strategic dialogue was established during the visit of Hillary Clinton, the then US Secretary of State to India. In those years of the global economic turmoil which came as a result of the 2008 financial crisis, the US had shown confidence in the Indian economy by establishing the India-US CEO forum. The same forum established under the efforts of Dr. Man Mohan Singh recently saw the proposition of establishing an Indo USA FTA- free trade agreement. In 2018, India was granted the Strategic trade authorization-1 status by the USA, making it the third Asian country to achieve the status. This allows exports from the USA of products of high technology nature in civil space as well as defense domain to India.

The economic relations between India has not evolved without its share of setbacks. In November 2019, India lost a case involving the USA in the WTO whereby it was ruled that the export subsidies provided by the Indian government to its business houses are in violations of the norms of the trade body. India presented the case stating that the subsidies can be exempted under the special and differential treatment, which was rejected by the deciding panel of the trade body. For India, it was about protecting its native industries competing with the USA, and for America, it was the case of trade liberalization for which protectionism must be shunned. The USA has a system known as the Generalised system of preferences, established by the Trade Act of 1974, which gives chances to the developing countries to use trade to boost their economy. In June 2019, the GSP designation was removed for India by the USA. It was stated that India does not provide enough access to its domestic market to foreign players.

Both the countries are planning to bring out an FTA. It can give India access to the USA for many products, duty-free. Various reports point out that under the new trade deal (India USA FTA), India is planning to give access to the USA for its dairy market and on the other hand, the USA would provide concessions to generic drug exports from India. The new deal would benefit the sectors like automobiles, steel industries, textiles, and aluminum-based industries.

The economic equation between India and the USA has seen many ups and downs. This Covid19 pandemic has given both countries a unique opportunity to use one another in improving the economic dimension of Indo-US relations. The lowered confidence of the world towards China provides the right window in which the new trade deal can be laid out. It will benefit both the countries in the long run not only in the economic segment but also in other areas like defense cooperation, scientific collaboration, social ties among others.