US-India trade: 500 Billion dollars target sparks export optimism

Boost to Exports Expected in Technology, Defence, and Green Energy Sectors Amidst Ambitious Trade Goals. India and the United States have set an ambitious goal to increase bilateral trade to USD 500 billion by 2030 and are actively pursuing a mutually beneficial trade agreement to be negotiated by the fall of 2025, with exporters anticipating significant benefits, particularly in technology, defense, and green energy.

Exporters Optimistic About Trade Agreement

The Federation of Indian Export Organizations (FIEO) and trade experts emphasize that eliminating trade barriers and streamlining processes are crucial for enhancing bilateral trade. A trade agreement is expected to provide a substantial boost to India's exports, particularly in sectors such as technology, defense, and green energy, enhancing their global competitiveness. Hi-Tech Gears Chairman Deep Kapuria highlighted that the USD 500 billion target is a key outcome of Prime Minister Narendra Modi's recent visit to Washington and will likely attract US investors to India.

Government's Win-Win Strategy

The Indian government aims to strike a "win-win" trade deal with the U.S. by fall 2025, focusing on reducing import duties and non-tariff barriers. Discussions include increasing imports of American oil, gas, and defense equipment to address the trade deficit, and India has already reduced import duties on items of interest to the U.S., such as Harley Davidson bikes and bourbon whiskey.

Potential Hurdles and Alternative Perspectives

Despite the optimism, the Global Trade Research Initiative (GTRI) suggests that a full India-US FTA is unlikely, citing the US preference for securing the best tariff deals without broad tariff cuts. GTRI also notes that many trade issues are already addressed under the Indo-Pacific Economic Framework (IPEF)8. It suggests focusing on sector-specific deals instead of a comprehensive FTA.

Current Trade Landscape

In 2023, bilateral trade between India and the US reached USD 190.08 billion, with India's merchandise exports to the US totaling USD 83.77 billion and services exports at USD 36.33 billion. India maintains a trade surplus with the U.S. in both merchandise and services.