India-US Economic and Financial Partnership

• The 9th Ministerial Meeting of the India-US Economic and Financial Partnership took place recently.
• The Union Minister for Finance and Corporate Affairs led the Indian delegation, while the Treasury Secretary led the US delegation.

What are the Meet's Main Highlights?

Attempts to Raise Climate Ambition:

• Both countries shared the reenergized global efforts to raise climate ambition, as well as their respective domestic efforts to meet publicly stated climate goals.

Macroeconomic Issues:

• In the context of the Ukrainian conflict, both reaffirmed their commitment to the central role of multilateral cooperation in addressing global macroeconomic challenges, such as rising commodity and energy prices and supply-side disruptions, and reaffirmed their commitment to the role of multilateral cooperation in addressing these global macroeconomic challenges.

Banks for Multilateral Development:

• They recognised the significance of working through MDBS to assist India in accessing and mobilising available financing to support development goals, including climate action.
• Both intend to continue their multilateral and bilateral engagement on these and other global economic issues.

Equal Debt Treatment:

• Both parties reaffirmed their commitment to debt sustainability, transparency in bilateral lending, and close coordination on extending fair and equal debt treatment to debt-stricken countries.
• Both reiterated their commitment to stepping up efforts to implement the G20 Common Framework for Debt Treatment in a predictable, timely, orderly, and coordinated manner.

Quantified Collective Goal:

• Both parties agreed to raise USD 100 billion per year from public and private sources for developing countries until 2025, in exchange for meaningful mitigation actions and transparency on implementation.
• The countries also discussed mutual collaboration in information sharing to combat offshore tax evasion.

Foreign Account Tax Compliance Act:

• The two parties will continue to discuss the Foreign Account Tax Compliance Act (FATCA) for the exchange of financial account information.

India's relations with the United States:

• The strategic partnership between the United States and India is based on shared values, such as a commitment to democracy and the rule-based international system.
• Through trade, investment, and connectivity, the United States and India share a common interest in promoting global security, stability, and economic prosperity.
• The United States supports India's rise as a leading global power and a critical partner in efforts to keep the Indo-Pacific region peaceful, stable, and prosperous.

Economic Relations:

• Overall bilateral trade in goods and services between the United States and India will reach a record USD 157 billion in 2021.
• The United States is India's most important trading partner and export market.
• One of the few countries with which India has a trade surplus is the United States. India had a USD 32.8 billion trade surplus with the US in 2021-22.

International Collaboration:

• India and the United States work closely together in multilateral organizations such as the United Nations, the Group of 20 (G-20), the Association of Southeast Asian Nations (ASEAN) Regional Forum, the International Monetary Fund, the World Bank, and the World Trade Organization.
• The United States welcomed India's appointment to the UN Security Council for a two-year term in 2021 and supports a reformed UN Security Council with India as a permanent member.
• The United States and India, along with Australia and Japan, form the Quad to promote a free and open Indo-Pacific and to provide tangible benefits to the region.
• India is also one of twelve countries that collaborate with the US on the Indo-Pacific Economic Framework for Prosperity (IPEF).
• The United States joined the International Solar Alliance, headquartered in India, in 2021, and the United States Agency for International Development joined in 2022. (USAID).

What are the Consequences of India-US Ties?

Imposition of Tariffs:

• In 2018, the United States imposed a 25% tariff on certain steel products from India and a 10% tariff on certain aluminum products.
• In June 2019, India retaliated by raising tariffs on 28 products worth approximately USD 1.2 billion imported from the United States.
• However, following the imposition of Section 232 tariffs, steel exports to the United States fell by 46% year on year.

Mistaking Self-Sufficiency for Protectionism:

• The Atmanirbhar Bharat Campaign has exacerbated the perception that India is becoming a protectionist closed market economy.
• Exemption from the United States' Generalized System of Preferences: Beginning in June 2019, the United States decided to withdraw duty-free benefits to Indian exporters under the GSP programme.
• As a result, special duty treatment on USD 5.6 billion in US exports was discontinued, affecting India's export-oriented sectors such as pharmaceuticals, textiles, agricultural products, and automotive parts.

Hostility of the United States Towards Other Countries:

• Some of the differences between India and the US are not directly related to the India-US relationship, but rather to the US' hostility toward third-country allies such as Iran and Russia.
• Other issues threatening the India-US relationship include India's ties with Iran and India's purchase of S-400 missiles from Russia.

The Way Forward

• The unparalleled Demographic Dividend creates enormous opportunities for technology transfer, manufacturing, trade, and investment for US and Indian firms.
• India is emerging as a key player in an international system undergoing unprecedented change. It will use its current situation to investigate opportunities to advance its vital interests.
• Today, India and the United States are strategic partners in the true sense of the term: a partnership among mature major powers that seek to manage differences by ensuring continuous dialogue and channeling these differences into new opportunities.