U.S. Stays India’s Top Trading Ally, Export Destination in 2024

U.S. Stays India’s Top Trading Ally, Export Destination in 2024

Sub : Eco

Sec: External Sector

The U.S. continues to hold its position as India’s top trading partner in the first seven months of 2024, with bilateral goods trade exceeding $190 billion.

• Growth in Indian Exports to the U.S.:
  • Indian exports to the U.S. grew by 9.3%, reaching $48.2 billion during the January-July 2024 period.
  • Major export items included garments and textiles, pharmaceuticals, precious and semi-precious stones, smartphones, and mineral fuels.
• Decline in U.S. Exports to India:
  • India’s imports from the U.S. fell by 5%, from $25.9 billion to $24.6 billion during the same period.
• Long-Term Export Growth:
  • From2018 to 2023, India’s merchandise exports to the U.S. saw substantial growth, increasing from $54.3 billion to $83.8 billion, marking a 54.4% increase.
  • Services exports to the U.S. also rose by 25.6%, from $28.9 billion in 2018 to $36.3 billion in 2023.
  • Combining both merchandise and services, India’s total exports to the U.S. surged from $83.2 billion in 2018 to $120.1 billion in 2023, reflecting a 44.3% overall increase.
• Impact of Generalized System of Preferences (GSP) Withdrawal:
  • The withdrawal of the GSP scheme by the U.S. in 2019 had minimal economic impact on India.
  • Although India was the largest user of the GSP program, accounting for $5.7 billion in exports, this figure is considered negligible in the context of India’s broader export portfolio.
• India’s Imports from the U.S. (January-July 2024):
  • Key import items from the U.S. include mineral fuels, precious and semi-precious stones, mechanical and electrical machinery, aircraft and parts, ships and boats, chemicals, pharmaceuticals, and edible fruits and nuts.
• Significance of the U.S. Market for India:
  • The U.S. remains a significant market for Indian goods, particularly in technology and engineering products.
  • India’s rising demand for advanced technology, energy, and capital goods from the U.S. presents opportunities to further boost bilateral trade.

In summary, the U.S. continues to be India’s most important trading partner, with robust growth in Indian exports. The evolving trade relationship highlights opportunities in technology, engineering, and advanced capital goods. Despite the GSP withdrawal, the broader trade dynamics remain strong.

Generalized System of Preferences (GSP)

• Introduction:
  • Instituted in 1971 under the United Nations Conference on Trade and Development (UNCTAD).
  • A voluntary trade measure implemented by developed countries to provide preferential tariff treatment to imports from developing countries.
• Key Features:
  • Preferential Tariffs:
    • Includes either elimination or reduction in customs duty for eligible products exported from beneficiary developing countries (BDCs).
  • Rules of Origin:
    • Exporters must fulfill rules of origin criteria to ensure the product originates from the country of export and is not diverted from another country.
  • Unilateral Scheme:
    • It is a unilateral customs duty preference scheme, meaning no reciprocal customs duty preferences are required from India or other BDCs for the developed country.
  • Countries Granting GSP:
    • Major countries providing GSP preferences include Armenia, Australia, Azerbaijan, Belarus, Canada, EU, Japan, Kazakhstan, Kyrgyz Republic, New Zealand, Norway, Russian Federation, Switzerland, Tajikistan, Turkmenistan, Turkey, UK, US, and Uzbekistan.
    • Each developed country has its own regulatory framework for GSP tariff preferences.
  • Importance of GSP Schemes:
    • Varies in terms of product preferences and the exports from developing countries eligible for tariff preferences.
    • GSPs from the EU and US are particularly comprehensive and important for developing countries.
    • Some schemes offer additional tariff preferences to a specified class of developing countries, notably providing extensive coverage to Least Developed Countries (LDCs).
  • India’s GSP Benefits:
    • India is a major beneficiary, realizing significant export volume under the GSP.
    • Approximately 40% of India’s exports to the EU are under the EU GSP.
    • Prior to the withdrawal of the US GSP, around 10% of India’s total exports to the US were under this program.

United Nations Conference on Trade and Development (UNCTAD)

• Overview:
  • UNCTAD is the UN’s leading institution dealing with trade and development.
  • Established in 1964 by the United Nations General Assembly.
• Objectives:
  • Assist developing countries, particularly the least developed countries and countries with economies in transition, to integrate beneficially into the global economy.
  • Promote a global partnership for development and enhance coherence in global economic policy making.
  • Ensure development gains from trade are realized by all.