The recently concluded Basic Exchange and Co-operation agreement (BECA) is the third foundational defence deal signed between the US and India in the past five years.
The three deals, the Communications Compatibility and Security Agreement (COMCASA), Logistics Exchange Memorandum of Agreement (LEMOA) and BECA, are a strong reflection of the deepening bilateral military ties between the two nations.
BECA is being hailed as a landmark deal as it gives India access to geospatial data from US military satellites which will prove to be critical in tracking enemy positions and movements during the war and the availability of real-time location information will also help the country in disaster management during natural calamities. These three deals are built on a strong foundation of mutual trust between the two countries and set the stage for further economic and security co-operation going forward.
Military ties between the two major economic powers have seen an upswing under the Narendra Modi-led BJP government.
In 2016, the Logistics Exchange Memorandum of Agreement (LEMOA) gave both nations access to each other's specific military bases for refuelling, repair, and replenishment.
This was followed up in 2018 by COMCASA to strengthen the secure communication system between defence forces. While common military interests have aligned India and the US to a great extent, the two countries are yet to iron out many issues on the trade and economic front.
Despite expectations of a mega trade deal in the making, very little has been achieved in terms of outcomes.
As India watches the US Presidential election results keenly, we highlight that irrespective of who the United States votes to power, the India-US results will continue to strengthen.
The more pertinent question however is, will both economies make progress on the economic and trade front post a robust military co-operation?
US elections: Biden or Trump for India?
While pollsters expect a Joe Biden win, the Democratic candidate's stance on trade, the American economy, and China is not in sharp contrast with that of the current president and Republican candidate Donald Trump.
Biden's bent towards protectionist policies, call for Buy American, and focus on domestic subsidies is not too far from Trump's call for America First.
On China too, Biden has maintained a hardline, clearly stating that China will pay the price for not playing the trade game fairly. Under Democratic leadership, the US might exert greater stress on environmental and labour law compliance in trade pacts, which might not be good news for emerging trade economies, especially the South-Asian belt.
It is noteworthy that when it comes to tariffs, average tariffs on Indian goods applied by the US authorities have been fairly consistent, independent of the party in power since 1991.
Consistent with historical positions on free trade, average tariffs on Indian goods from 1991 to 2018 (2019-2020 data not available) have been marginally lower under a Republican president (3.16%) compared to a Democratic president (3.37%).
This is despite the Trump administration labelling India as a "tariff king", challenging India's export subsidy regime (and winning it at the WTO) and remaining elusive on the limited trade deal between the two nations.
If we don't include the Trump Years (post-2016), the average tariffs have been even lower under a Republican president (3.07%). In all probability, frictions in global trade are certainly not expected to end soon whichever way the results of the election go.
Irrespective of the results, the US' focus on America First will continue. India on its part will also focus on safeguarding its domestic industry's interest first under Aatma Nirbhar Bharat.
India is open to FTAs, but needs to strategically opt for 'natural allies' like the US and EU and avoid any alliance for free trade at the cost of the domestic industry having learnt its lessons from previous FTAs.
However, strong deep-trade complementarities, common defence interests between the two nations, foreign policy towards China and India's strategic position in the Asian region is expected to strengthen the foundational relationship between the two nations going forward irrespective of the election result.
But in the current backdrop and post-COVID-19 world, greater political will is needed for progress on co-operation on trade and economic front.
India's export basket and the prospects of an India-US trade deal
India's major exports to the US include gems & jewellery (17%), textile & readymade garments (15% share in total exports to the US), drugs and pharma products (13%), agriculture and allied products mainly marine (9%), machinery & equipment (10%), electric machinery (5%) and electronics (4%).
In terms of our major imports from the US, petroleum & crude (19%), chemicals (10%), agriculture & allied (mostly fruits) (5%), aircraft spacecraft & parts (5%), electric machinery (7%), electronic goods like medical, telecom, and electronic instruments (8%), gems & jewellery (12%) account for the bulk.
India's bilateral trade with the US has increased from $12 billion in FY2000 to $89 billion in FY20. Exports from India to the US have grown by over six times from $8 billion to $53 billion and imports from the US to India have grown from $3.5 billion to $35 billion in the last two decades, with a current trade surplus of around $17 billion with the US.
The US continues to be the top destination for textile exports, accounting for almost a quarter of our textile exports.
However, the recent scrapping of GSP benefits has resulted in India facing higher trade barriers for textile exports to the US and EU compared to its counterparts like Bangladesh, Vietnam, and Pakistan.
It is therefore not surprising that India has asked for more predictability from the US when it comes to trade decisions.
Both India and the US have shown willingness on signing a trade deal, however, a full-fledged FTA with America has hit a roadblock due to conflict areas such as pharma, data security, agriculture, and dairy.
However, the post-COVID-19 world trade order is set to change in the coming years and China's aggression and geopolitics will have a strong influence on shaping the direction and quality of trade going forward.
Building a strong economic front against China will also be a foreign policy priority for both the US and India and could be a key driver for greater economic co-operation.
It might take some time for both nations to come up with a more balanced outcome on trade, however greater cooperation in new areas like artificial intelligence, green technology, digital, medical devices can lead the way.
The US- India strategic alliance whether military, trade, or otherwise, shall continue to be built on limitless potential of the people of these two economic powers, irrespective of the outcome of November 3.
(V.K Saraswat is member (Twitter: @DrVKSaraswat), NITI Aayog; Prachi Priya is a Mumbai-based economist; and Aniruddha Ghosh (Twitter: @ani_econ) is a PhD student at Johns Hopkins University. Views are personal.)