Relevance: GS-2: Bilateral, regional and global groupings and agreements.

Key Phrases: Trade Partner, Rule of law, Indo-Pacific, Human rights, International Cooperation, Supply Chain Enhancement, Indo-Pacific Economic Framework.

Context:

• The US is bullish about its trade relationship with India and expects it to grow rapidly.

Current economic partnership between India and the US

• The Indo-US partnership is founded on a shared commitment to freedom, democratic principles, equal treatment of all citizens, human rights, and the rule of law.
• The United States and India have shared interests in promoting global security, stability, and economic prosperity through trade, investment, and connectivity.
• The United States supports India’s emergence as a leading global power and vital partner in efforts to ensure that the Indo-Pacific is a region of peace, stability, and growing prosperity.
• The US-India economic relationship is an enviable one. If we look at the trade data between the two countries, it is probably one of the fastest growths recorded by any other nation.
• It is only going to grow because
  • India is a large market,
  • it has got incredible talent,
  • its ability to help with R&D and
  • India has a strong diaspora in the US.
• India is also a founding member of the Indo-Pacific Economic Framework (IPEF). So both countries have several forums where they are having conversations.

Potential Sectors for Cooperation

• Software and Tech:
  • Software and technology have so much headroom for growth. There is so much digitisation happening that is transforming India –US relationship.
  • Many of the US Corporations are operating from India.
• Supply Chain Enhancement:
  • Supply chains have been affected globally because of the Covid-19 pandemic and Russia-Ukraine war. India can no longer rely on those supply chains. There are areas within these supply chains where India could step up even more.
• Artificial Intelligence Cooperation
  • The current pandemic has highlighted on AI’s potential benefits across a range of sectors.
  • Indo-US partnership will enable faster development of this critical technology while mitigating its downsides.
• International Cooperation:
  • India and the United States cooperate closely at multilateral organisations, including the United Nations, G-20, Association of Southeast Asian Nations (ASEAN) Regional Forum, International Monetary Fund, World Bank, and World Trade Organization.

Challenges in the cooperation:

• Talent:
  • India has abundance of young talent, so it should make sure the curriculum is modern, and also ensure that the folks have adequate skill sets to work in global companies.
• Intellectual Property laws:
  • On the regulation side with regards to IP laws, India should make sure that the US company’s IPs are protected.
  • If a company walks into the Indian market as a knowledge product company, should feel comfortable that its hard-earned IP will get protected.
• Goods and Services Tax (GST):
  • There are various ongoing issues in implementation of GST due to which traders are finding it difficult to manage.
• Issue of Free Trade Agreement:
  • Bilateral trade agreements seem to be the order of the day across the world. But the US does not appear to be keen on a Free Trade Agreement (FTA) with India.

Conclusion:

• All these issues are solvable and it is natural for an emerging global powerhouse to go through this.
• Both governments can make real progress by pursuing negotiations on two parallel tracks. One is dedicated to removing and resolving long standing irritants and disputes, and the other is focused on building a 21st-century trade framework that can bring together the best of both countries, starting with the key sectors that are driving growth and innovation across the economic corridor.

Sources: The Hindu BL

Mains Question:

Q. Critically examine the economic relationship between India and the US in the backdrop of international development in the year 2022. (250 words).