What is the issue?
- Commercial relationship between US and India is hindered by few protectionist measures.
- New reforms needs to be introduced to address the concerns in Indo-US trade.
What is the status of Indo-US trade relations?
- Over the past decade, two-way merchandise trade has grown from $44 billion to $74 billion.
- For a point of comparison, taking US-China trading relationship the trade topped $635 billion in 2017.
- US-India trade was 10 per cent the size of US-China trade, now the trade is at 11 per cent as large, India aim much higher.
- India can seize the strategic opportunity through trade and investment to become an alternative hub for US business in the Indo-Pacific.
What are the visions on India’s trade activities?
- Economic Survey 2017-18 pointed out, India’s projected economic growth is between 7 per cent and 7.5 per cent for 2018 and 2019.
- Inflation is down a bankruptcy code is helping resolve stressed assets issues, and the goods and services tax (GST) has resulted in widening the indirect tax base.
- India has emerged as a strong geo-economic player, there are signs of India transitioning into an innovation-led economy, with more start-ups.
- India is now witnessing enhancements in global benchmarks in the World Bank’s ease of doing business index, Moody’s rating, the global innovation index, or the global competitiveness index.
- At a time when foreign direct investment is lower globally, India recorded the highest inflow of FDI in 2016 at $60.1 billion.
- The Government has fast-tracked 200 infrastructure projects worth $140 billion, backed by technology-driven and e-governance initiatives.
What protectionist measures concern Ind0-US trade?
- India - India leaves the opportunities for mutually beneficial growth and job creation untapped, India not been able to accelerate two-way trade between global economies.
- Instances such as blunt imposition of price controls, unpredictable tariffs on agriculture or electronics products, and preferential market access for domestic companies is concerning the trade.
- A challenging environment that does not consistently protect intellectual property is deterring further foreign investment.
- The Government’s decision to continue the price control policy portends a continued downward trend in life sciences sector.
- US - Recent proposals to restrict legal immigration and calls to unilaterally impose tariffs have the potential to disrupt a mature trading relationship that the US enjoys with its partners.
What measures needs to be taken?
- Resolving transfer pricing disputes, updating the US-India bilateral tax treaty, and overhauling tax litigation and administrative processes will promote trade.
- India’s financial markets must continue to mature and deepen to support the economic growth.
- Bond market reform are needed for companies and investors to deeper the capital resources and the investment diversification.
- To rise to its full potential, India will require a renewed focus on reforms and a more open trade architecture.
Source: Business Line
