In another sign of the deepening economic relationship between India and the United States, bilateral trade in goods between the two countries crossed the $100 billion mark in 2021, making it the largest volume of goods trade in a calendar year in India-US economic history.
This also represents an almost 45% jump from 2020, and while US trade with its top 15 partners increased over the past year, the single biggest jump was with India.
India retains a trade surplus in the relationship.
According to figures released by the US Census Bureau, India-US bilateral goods trade was worth $113.391 billion from January to December 2021. India exported goods worth over $73 billion, and imported goods worth a little over $40 billion dollars.
In 2020 – an unusual year because of the coronavirus (Covid-19) pandemic and subsequent economic restrictions – trade fell to a little over $78.2 billion, from the high of $92.1 billion in 2019. India had then exported goods worth $57.8 billion and imported goods worth $34.2 billion.
Placing the figures in perspective, Richard M Rossow, the Wadhwani chair in US-India Policy Studies at the Centre for Strategic and International Studies (CSIS) and the foremost expert of the bilateral economic relationship in Washington DC, said that bilateral trade has been on an upward trajectory for 20 years, and shrunk year-on-year only three times since 2002.
"While we should certainly pause to celebrate the milestone of crossing the $100 billion in bilateral trade, it is not far off the overall trajectory of the trade relationship in this period." The 45% jump, he said, was due to the "deep trough" in 2020, as both India and the US dealt with the initial onslaught of the coronavirus.
Mukesh Aghi, president and chief executive officer of the US-India Strategic Partnership Forum (USISPF), said that a key reason for the spike in Indian exports to the US was the concerted increase in demand in the US market.
"The US has seen consumption-driven growth in the past year. There was pent-up demand for items such as jewellery and electronics which has got channelled in the last six months. The fact that US companies have also sought to diversify their supply chains has played a role too. Electronic component markets have moved production to India. For instance, Apple now exports a million smart phones from India to the United States every month." The challenge, he added, was to sustain the momentum.
When asked what had driven the spike, Rossow said that while the details of which products drove the record-breaking year was not clear yet, the push by the Donald Trump administration to sell American hydrocarbons to India had been a key factor in enabling greater trade.
"A decade ago, the US had nearly zero exports of natural gas, coal, or crude oil to India. Today these three are all among the 10 biggest export categories. US imports from India are more balanced, with good increases in trade among a range of categories. But a few stand out as over-performers such as furniture, aluminium, and food products."
India's principal goods exports to the US are precious and semi-precious stones, drugs and pharmaceuticals, petroleum products, cotton fabrics, garments, marine products, iron and steel products, electrical equipment and auto components. And its primary import was crude oil (the biggest import head in 2021, some $10.39 billion worth). India also imports pearls, coal, chemicals, gold, paper, and precious stones from the US.
Recently, the US approved imports of mangoes and pomegranate from India, and secured New Delhi's approval to supply of cherries, alfalfa hay, pork and pork products into India, according to an Indian government official who asked not to be named.
"This is as per a recent agreement between the Department of Agriculture and Farmers Welfare and the US Department of Agriculture (USDA) for implementing the '2 Vs 2' agri-market access," he added.
Another official familiar with the bilateral relationship said that the spike in trade was also a product of the concerted Indian attempts to deepen economic ties with a range of American economic stakeholders – be it through extensive commercial engagement or facilitating business-to-business exchanges or working to get commitments by major American corporates to source material from India or proactively leveraging the sentiment in the US to diversify from China.
A third official pointed out that the trade figures also firmly rebut the impression of India turning inwards and protectionist, and in fact, show that its outwards economic engagement, on its own terms, will only increase.
While India is working with Australia, the UK, the European Union, Canada and the US to push through larger trade arrangements, any major free trade agreement is unlikely, especially with the US, given the domestic political mood in Washington against trade pacts.
When asked if the increase in India-US trade showed that both countries have found ways to deepen ties while circumventing established formats, Rossow said, "Trade deals are helpful to boost trade ties, but far from essential. In recent decades, nations such as Japan, Korea, Taiwan, and China managed to become major global trade players without vast networks of trade deals. It does, however, feel like our nations continue to defy gravity. Both governments have taken protectionist steps in recent years, both globally and towards each other. Whether this continued growth in trade can be sustained in light of anti-trade policies remains to be seen."