The Confederation of Indian Industry (CII) in association with the US India Business Council (USIBC) today launched '$500 Billion Roadmap', a report that provides an assessment of current trends in US-India trade and the policy reforms needed to set business ties on a faster growth trajectory. Specifically, the report has listed out 13 policy interventions to help boost trade between the two economies. The report also includes several case studies of "green field" growth potential in areas outside the traditional industry verticals, apart from highlighting three scenarios to reach the $500 billion target in bilateral trade.
"There is increased focus on fostering greater synergies in the economic relationship between India and the US. This is evident from the fact that the two-way trade between India and US has grown at an impressive compound annual growth rate (CAGR) of 11.8 per cent over the last two decades," states Chandrajit Banerjee, Director General, Confederation of Indian Industry. "However, to achieve the shared goal of reaching $500 billion in trade from the current $142 billion in 2018, would require renewed focus on tackling some of the irritants to unleash the full potential of the economic relationship," he added.
"This report undertaken by CII and USIBC outlines the steps needed to facilitate greater trade and opportunity sectors that can unleash $500 billion in two-way trade between the US and India. We have seen trade grow by over 50 per cent over the past five years. But in order to see a doubling and tripling of the trade relationship, the two countries must work out a trade deal that can open markets in both directions," said Nisha Biswal, President, USIBC.
Aside from trade, investment ties between the two economic behemoths also remain solid-cumulative US foreign direct investment (FDI) into India amounted to roughly $44.5 billion in 2017, 15.1 per cent jump from 2016. However, in order to boost investment levels further, additional steps are required by the Indian policymakers in the form of further streamlining and simplifying the Single Window Clearances, instituting a mechanism of Automatic Deemed Approvals for NOCs, further liberalisation of FDI norms, among others, the report points out.
In a press note, CII said the report has been launched at a time when there is a significant opportunity to give a major fillip to the US-India relationship, given the trade tensions with China. "Many US companies are actively exploring alternative investment destinations to relocate their manufacturing supply chains-with India as a competitive destination. However, for this to materialise, both sides have to look at challenges in the relationship as opportunities for growth and look for creative solutions to break the logjam wherever possible," it said.
The 13-point growth agenda range from reinstating Generalised System of Preferences (GSP) benefits by the US for India, bringing down import duties on high end motorcycles to zero, arriving at a consensus on a pricing mechanism for medical devices, modifications in India's e-Commerce Policy, removing high tariffs on steel and aluminium imports by the US, fostering greater cooperation in strengthening partnership in defence and aerospace, among others.
Further, in the report, USIBC and CII have identified a few areas where emerging market segments, technologies and collaborative ventures can yield benefits for US-India trade, as well as help tackle global development challenges. These niche sectors include the following - Harnessing the Blue Economy by expanding trade in maritime and marine activities, pushing the Sports Economy by tapping the opportunities presented in promoting US-India engagement in sports activities, greater collaboration in Space industry, capitalising on the immense potential of the US-India tourism scenario and focusing on collaborating in the areas of sustainability and environment.
Specifically, the report has also laid out the following three possible scenarios for pushing the India-US trade to the envisaged $500 billion target from the current print of $142 billion in 2018.
The first, 'limping' scenario assumes a deterioration in the India-US trade relationship. Accordingly, bilateral trade grows at a CAGR of 3.9 per cent over the next several decades, crossing the $500 billion-mark only in 2052.
The second, under the 'Chugging' scenario, the bilateral trade relationship and key drivers of economic growth largely remain unchanged from the current status quo, bringing the bilateral relationship to $500 billion by 2035. The implied growth rate is 7.9 per cent between 2019 and 2035.
The third 'Soaring' scenario assumes positive policy and regulatory moves and a significant increase in positive trade engagement, bringing bilateral trade growth to 11.8 per cent and reaching the $500 billion mark by 2030.