There is vast potential for our countries to work together on an ambitious agenda of cooperation, bilaterally, and with regard to what we can do together to address the global challenges.

Indian Prime Minister Manmohan Singh

 


The world�s oldest democracy and the world�s largest democracy are natural partners, sharing important interests and fundamental democratic values.

US President Barack Obama

 

A Shared Partnership

BY the time she is 75, India will be helping to shape the destiny of the world in the 21st century. She could be the most competitive of nations. By that time if �right partnership� between the two great democracies can be structured and built up � I can see, 15 years from now, an India which has taken its relationship with the US to a whole new level, which has created something special and enduring to the great advantage of both nations. It will be relationship that is not buffeted by the ill winds of change, one that is not vulnerable to changes of government, that is a still point as other alliances and partnerships turn around. A partnership based on business links, on education and on a shared future.� Indra Nooyi, PepsiCo�s first lady chairman and CEO has many a reason to dream so. It�s a happening thing.

It indeed is a happening thing if what the US President Barack Obama said at the US-India Strategic Dialgue Reception (in Washington on June 3, 2010) is any pointer. "India is a leader in Asia and around the world.  It�s a rising power and a responsible global power.  That�s why I firmly believe that the relationship between the United States and India will be a defining partnership in the 21st century", said the US President who is on four-day India visit begining November 6. ".....the relationship between the United States and India is fundamentally unique -- because, as our strategy explains, we share common interests, but we also share common values, as the world�s two largest democracies, and as countries that are rich in diversity, with deep and close connections among our people", Obama said. 

The Joint Statement (of US Secretary of State Hillary Clinton and Indian External Affairs minister S.M.Krishna) issued after the conclusion of U.S.- India Strategic Dialogue in Washington on June 3, 2010 echoes the similar spirit of togetherness:"The U.S. � India Strategic Dialogue is propelled by the dynamic momentum achieved in the U.S.-India relationship over the last decade and is in pursuance of the global strategic partnership - for a better world that Prime Minister Singh and President Obama reaffirmed during their meetings in November 2009 and April 2010 in Washington. Secretary Clinton and Minister Krishna pledged to deepen people-to-people, business-to-business, and government-to-government linkages between the world�s oldest and largest democracies, for the mutual benefit of both countries and for the promotion of global peace, stability, economic growth and prosperity. Both recalled that the India - U.S. partnership rests on the firm foundation of common ideals as well as security and economic interests. The guiding principles upon which both nations were founded � democracy, mutual respect, individual liberty, rule of law, and an appreciation for the strength we derive from being pluralistic societies � make the India -U.S. bond strong, resilient, and uniquely important for building a peaceful, prosperous, inclusive, and sustainable world."


India Budget to spur investment : USIBC President

The U.S.-India Business Council (USIBC) praised India's recent budget announcement, which sets forth clear parameters that will spur and sustain greater investment in the country's infrastructure sector. "The sheer confidence this budget represents is worthy of our praise," said Ron Somers, President of the U.S.-India Business Council. In his much-anticipated Budget address, the Finance Minister outlined proposals that will favorably support greater impetus to invest in the 'India opportunity'. India's economy is one of the world's fastest growing economies, exceeding an 8% rate of growth in GDP.

Infrastructure development is featured as a high priority in the 2011-2012 Indian Budget: $6 billion in tax-free bonds have been approved by the Indian Finance Ministry, as well as floating the prospect for establishment of a major infrastructure debt fund, which will be benefited by the creation of a deeper corporate bond market.

American industry also praised the liberalization toward foreign institutional investment (FII) in equity mutual funds. "The opening of the mutual fund industry to FIIs is a step that will serve to mobilize significant amounts of capital and expertise in India's financial markets," commented USIBC President Ron Somers. "This change, along with the raised FII investment limits in some infrastructure bonds and strides leading to a predictable, streamlined investment tax regime, will ultimately bolster India's efforts to build-out the country's infrastructure. U.S. Industry stands ready to be full participants in this activity," Somers said.

U.S. firms read as a favorable indicator the Government of India's stated goal to eliminate bottlenecks in the country's food distribution system, which may hint at a soon-to-be-announced opening of the country's multi-brand retail sector. India is presently battling major food price-rise and inflation. These twin challenges can be addressed by improving efficiencies in the farm-to-market supply chain, which will be benefited by inviting into this sector both technology and investment. "The beneficiaries of modern retail, resulting from improved access to food distribution outlets, will be farmers," Somers said. The Union Finance Minister pointed out in his budget remarks "the massive inefficiencies in India's agricultural supply chains, whose high cost hurts rural farmers most."

"India's next evergreen revolution, spawned by the greater efficiencies in India's farm-to-market supply chain that will be brought to bear by the entry of organized players in this sector, is a 'game-changer' that will benefit the millions of Indians who make their living in the rural agricultural sector, " Somers said.

In addition to the 'hard' and 'soft'  financial infrastructure attributes of the budget, combined with the prospect of the opening India's multi-brand retail sector, U.S. Industry hails India's signal to enhance spending in the defense and security sectors. India's has embarked over the next year on a $46 billion upgrade of its military. U.S. firms are eager to partner with Indian counterparts to bring 'best technology' to India's armed forces and security establishment. 
 

In an interview Sanjay Puri, chairman of the US India Political Action Committee (USINPAC) said As global investors are taking note of the fact that the Indian economy has been booming, in spite of a global recession, more leaders in America are realizing the value of building stronger business ties with India.  

Nooyi�s forthright assertion on Indo-US relationship reflects what the rest in industry, business and possibly the policy makers in both the countries too when she as the first lady chairman of US India Business Council (USIBC) said: �The door for relationships in business is now ajar. We need to keep pushing it open. We need to ensure that US companies are aware of the opportunities from infrastructure investment in India. We must then support a bilateral investment treaty with India, on which I understand that discussions are going well. We must also accelerate technology transfer and collaboration in many fields including agriculture.� Experts' pre-global melt down projections put Indo-US trade at $ 100 billion by 2011-13.

The Indo-US merchandised trade in calender year stood at US$ 37.63 billion compared with US$ 44.42 billion. The decline is attributed to the global melt down since 2008.

According to Department of Industrial Policy & Promotion of the federal ministry of Commerce and Industry, Government of India, the FDI equity inflows from the US into India during the first seven month's of India's fiscal year 2008-09 stood at $ 1258 million. Since fiscal 2000-01 to October, 2008 total FDI equity inflow from the US stood at $ 5791 million. The top attracting sectors is are led by Services (Financial and non-financial) with 22 percent of total FDI equity inflows into the country followed by Computer Software & Hardware (12 percent); Telecommunications (8 percent); Construction (6 percent); Housing & Real Estate (6 percent); Automobile and Power ( 4 percent each); Petroleum, natural gas; Chemicals; and Metallurgical Industries ( 3 percent each).


Share of Top Investing Countries FDI Equity Inflows

(In Rs. crore)
 

Country 2007-08 (April-March) 2008-09 (April-October, 09) Cumulative (Apr.2000-Oct.'08) % to total inflow (In terms of Rs.)

Mauritius

44483
(11096)
33361
(7694)
143734
(33329)
44

Singapore

12319
(3073)
8150
(1909)
26275
(6266)
8

USA

4377
(1089)
5320
(1258)
25287
(5791)
8

UK

4690
(1176)
3036
(701)
22100
(5063)
7

Netherlands

2780
(695)
3216
(740)
15137
(3445)
5

Japan

3336
(815)
971
(223)
10307
(2349)
3

Germany

2075
(514)
2302
(538)
9040
(2082)
3

Cyprus

3385
(834)
3698
(827)
7765
(1812)
2

France

583
(145)
1250
(295)
4634
(1056)
1

UAE

1039
(258)
780
(186)
3653
(849)
1

Total Inflows*

98664
(24579)
80395
(18707)
350495
(81216)
-

Note *

(i)    Includes inflows under NRI Schemes of RBI, stock swapped & advances pending for issue of shares.
(ii)   Cumulative countrywise FDI inflows (from April 2000- October 2008)
(iii)  Percentage worked out in rupees terms & FDI inflows received through FIPB/SIA + RBI's Automatic Route + acquisition of existing shares only

Figures in bracket represent amount in $ Million.

Source:
Department of Industrial Policy & Promotion of the federal ministry of Commerce and Industry, Government of India
 

India has been seeking and trying to end the nuclear apartheid that the world has sought to impose on the country. With the signing of the Civilian Nuclear Cooperation Agreement on October 10, 2008 with the US, India is recognized as nuclear weapons state. The nuclear empowerment recognition by the Nuke club of 45 countries has unlocked immense potential of India in the field of nuclear energy and other related sectors. The nuke pact has removed the hurdle to trade in nuclear technology and equipment. The US-India nuke deal India would facilitate India to spend about $27 billion on 18-20 nuclear facilities in the next 15 years or so, the industry experts feel. This has at the same time opened up the door of India's nuclear power sector which offers immense potential to be explored and exploited by the reputed reputed internal nuclear power equipment suppliers. The US-India Business Council estimates that nuclear trade with India could be worth up to $ 150 billion over the next 30 years. Along with France and Russia, the leading US manufacturers have also joined the race for bagging NPCIL orders. NPCIL's nuclear power generation capacity is estimated at 4,000 megawatts.

In Defence also India has already signed the largest ever acquisition of military equipment from the US signing $ 2.1 billion deal with Boeing to buy eight long-range maritime reconnaissance aircraft.

India's merchandize trade with the US (FY 2005- 06 to 2009-10)
                                                                                                    (In US$ Million)
 

 

 2005-06

2006-07

2007-08

2008-09

2009-10

Exports to US 

 17353.06

18863.47

20731.34

21149.53

19535.49

Growth Rate (%)

 

8.70

9.90

2.02

-7.63

Imports from US 

 9454.74

11738.24

21067.24

18561.42

16973.68

Growth Rate (%)

 

24.15

79.48

-11.89

-8.55

Trade Balance  

7898.32

7125.23

 

2588.12

2561.82

FY: India's Fiscal Year: (April-March)
The country's total imports since 2000-2001 does not include import of Petroleum Products and Crude Oil.
Source: Federal Commerce Ministry, Government of India

In their joint statement on November 24, 2009 both the leaders (the US President and Indian Prime Minister) pledged to bolster and deepen cooperation on economic, trade and agricultural issues, including working bilaterally and with multilateral trade organizations to foster increased trade. Both leaders welcomed the potential for further expanding trade and investment between their countries, including in sectors such as infrastructure, information and communication technologies, healthcare services, education services, energy and environmentally friendly technologies. 

In his address at the Council of Foreign Relations (November 23, 2009) the Indian Prime Minister who sees the future of the India-US partnership with confidence and optimism said: "There is a growing convergence in our national interests, both within the bilateral framework and on regional and global issues. The changes in the global economic and political structures and the growing interdependence among nations today offer us a unique opportunity to look beyond our bilateral engagement to establish a strategic partnership of global dimensions. If we are to effectively tackle the multiple challenges that confront the world, India and the United States, as two leading democracies, must work together."


China's goods trade with the US (2004- November 2008)
 

 

2004

2005

2006

2007

2008

Exports

196682.0

243470.1

287774.4

321442.9

312704.0

Growth

 

23.78

18.19

11.69

-2.71

Import

34744.1

41925.3

55185.7

65236.1

66250.9

Growth

 

20.66

31.62

18.21

1.55

Balance (+)
(I $ million)

161938.0

201544.8

232588.6

256206.7

246453.1

The United States is India's largest trading partner. Bilateral merchandise trade in 2008 was $44.42 billion. Till September 2009 the Indo-US merchandize trade stood at $ 28.14 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

One finds a perceptible change in product-mix of India's export basket for US. Today items which are getting better response and account for almost three-fourths of India's exports to the US include gem and jewellery / woven apparel; knitted apparel; Misc. textile articles; and machinery. There has been substantial change in import profile as well. India's imports from the US mainly include optical and medical instruments; chemicals and fertilisers; machinery; aircraft. But in last few years Information Technology has also emerged as one of the major foreign exchange earners. North America, the US in particular, is expected to continue as the largest market for Indian software exports. The unshackling of country�s regulated economy in 1991 by Mr. Manmohan Singh, then Finance minister and now Prime Minister and his government has made India today a major IT power, said  Harris Miller, President of the IT Association of America (ITAA) in an interview with IndiaOneStop.com..

About outsourcing, Miller maintained, the moot question is �where do you do it? You can do it in the country where you are operating or you do it ten thousand miles away. That�s the challenge for Indian companies--to convince customers in the US, Japan and Europe. The reality is that over time, more and more of these functions will get outsourced. Whether they will go offshore or not is really the interesting part, and that�s the challenge Indian companies are going to face. More and more US companies are there, more and more Chinese companies are there, more and more Russian companies are there to compete for outsourcing opportunities.�


Financial turmoil
: Impact of discretionary spend on IT

"When India and the United States meet, it is a moment to celebrate the values of democracy, pluralism, liberty, and freedom. Today we have done that and much more. In our discussions today, we reaffirmed the importance of our relationship and decided on future steps to enhance our strategic partnership. We have agreed to further intensify our trade, investment, and economic cooperation in a way that creates jobs and prosperity in both our two countries and stimulates global economic recovery. We admire the leadership that President Obama has provided to stimulate and guide the G20 process that is now fully in place. We have decided to give a fresh impetus to collaboration in the fields of education, agriculture, and health. We will deepen our ongoing cooperation in frontier areas of science and technology, nuclear power, and space. This will open new opportunities for our universities and laboratories, and create human capital to meet the global needs of the future.

We had a very constructive exchange of views on strategic issues. Our defense cooperation is progressing well. We agreed on the early and full implementation of our Civil Nuclear Cooperation Agreement. Our strategic partnership should facilitate transfer of high technologies to India. The lifting of U.S. export controls on high technology exports to India will open vast opportunities for giant research and development efforts. It will enable U.S. industry to benefit from the rapid economic and technological transformation that is now underway in our country. In a few weeks from now, the meeting of the conference of parties to the United Nations Framework Convention on Climate Change will take place in Copenhagen. Both President Obama and I have agreed on the need for a substantive and comprehensive outcome, which would cover mitigation, adaptation, finance, and technology.

We reaffirmed our intention to work to this end bilaterally and with all other countries. We welcome the President's commitment to a major program for promotion of renewable energy, and I drew his attention to India's own ambitious national action plan on climate change, which has eight national missions covering both mitigation and adaptation. Just as we partnered each other in the shaping of the knowledge economy, we have the opportunity today to become partners in developing the green economy of the future. I underlined India's desire to benefit from clean and energy-efficient technologies from the United States. Our partnership will contribute to global efforts to combat climate change and achieve energy security. We had a detailed discussion on important regional and global issues.

We agreed that the Indo-U.S. partnership was important for addressing the challenges of an increasingly interdependent world that we live in. The global economic crisis has brought home the fact that our prosperity is interlinked. Our dialogue covered the need to have an open and inclusive architecture in the Asia Pacific regions. It is important for the international community to sustain its engagement in Afghanistan, to help its emergence as a modern state. The forces of terrorism in our region pose a grave threat to the entire civilized world and have to be defeated. President Obama and I have decided to strengthen our cooperation

We will work with the United States and other countries for the success of the nuclear security summit, which President Obama is hosting next April. In our discussions today, there was a meeting of minds on the future direction of our relations. I was deeply impressed by President Obama's strong commitment to the India-U.S. strategic partnership and by the breadth of his vision for global peace and prosperity."
 

Indian IT industry is making significant contribution to country's foreign exchange kitty and the US is still the largest market for the Indian IT industry, the BPO segment in particular. To what extent Indian industry would be able weather the current global financial meltdown would substantially depend on what measures the new US President Barack Obama takes to stem the rot the world has never seen since the Great Depression of 1929. The US recovery will lead the recovery of rest of the world.

 

 

INTERVIEWS

Sanjay Puri, chairman, US India Political Action Committee

Ron Somers, President, USIBC

Updated March 1, 2011