Feature of the Week

Tuesday, April 26, 2011
India-US trade in 2010
Tables & Graphs

The bandwidth of India-US strategic relation seems to be reflecting in the bilateral trade as well. The merchandise bilateral trade touched an all time high in 2010 and the growth achieved is also equally impressive. The 30% growth compared to previous year has brought the trade value to around $50 billion opening the new vistas for bilateral cooperation.


In 2010 the trade between India-US has shown the sign of improvement as compared to last year. Post recession, the volume of trade in goods between the worldís richest country and 11th largest economy was worth $48.8 billion; the US exports to India accounted for $19.2 billion and its imports from the country totaled $29.5 billion leading the trade deficit of $10.3 billion between both the countries.


India-US bilateral trade is growing at a CAGR of 11.39% since 2006 to 2010. The merchandise trade is more or less a two-way trade for both the countries, with the balance of trade favouring India. The balance of trade between both the countries narrowed for three consecutive years since 2006 and in 2009 it came down to mere $4.7 billion, as the trade was hit by the global economic slowdown during the year. In 2010, bilateral trade between India-US regained the lost momentum and trade balance stood at $10.3 billion with imports and exports experiencing an increase which was not recorded in last five years.


In 2010, US trade with India accounted for 1.5 percent of all U.S trade in goods, which totaled $3.2 trillion. In comparison, US-Canada trade accounted for 16.5 percent of USís overall trade in goods, and trade with China 14.3 percent. In November 2010 alone, the United States and China traded in goods worth $45 billion, close to a whole yearís worth of India-U.S. trade. The figure below shows India-US trade in goods (2006-2010).


Figure 1: India-US Trade in Goods (2006-2010) :

The total trade volume between India-US in 2010 was a 30% increase over the previous year. In 2009, for the first time in many years the bilateral trade declined mainly because of a nearly $5 billion dip in U.S. imports from India due to Recession. The bilateral trade in 2010 represents a more than eight fold growth over two decades that saw India holds market reforms and maps a new course for its economy.


Over the last five years India-US trade balance favoured India as US imports from India always exceeded the US exports to India. The demand for Indian commodities in US has grown with a CAGR of 7.8% and the demand for US goods in India has grown with a CAGR of 18.62% from last five years.


Apart from that, the service trade for both the countries has shown the consistent performance in last few years. The service supplied to US by India is always greater in dollar value than services exported to India by US in last few years. India is currently having a pool of semi-skilled labors and abundance of technical hands which provide services at a larger scale without being charging high labor cost. The table below shows how the trade balance have gone between both the countries since 2005 till 2009.


Figure:2- US service trade balance with India(USD Millions):

The above figure shows that in service trade India has dominated since 2006, the only year in which the trade balance favored US was 2005. Now in last few years the demand for Indian services in US is climbing year on year basis and the service trade gap is widening every year for US with India. In 2006, the gap was of $910 million which in 2009 reached to $2437 million, with an increase of 168%. The trade gap raised sharply in the year 2008 which figured $2309 million than $1083 million in the corresponding year. Global economic slowdown impacted the service trade of both the countries and for the first time the dollar values declined since 2005. The table below shows US service trade with India in major types of services since 2006.


Top five goods and top five service sector trades between both the countries:


The US trade with India is on the path of recovery and is likely to reach $60 billion mark in bilateral trade in 2011. Despite the growth in bilateral trade and the improvement in trade relations between India-US, there are still a number of economic and trade issues between both the countries. Like, both the nations seek greater market access to the otherís domestic markets, as well as the lowering of perceived trade barriers. There is considerable potential in both the countries to increase share in each otherís domestic market, although there are some non-tariff barriers for both the nations that have barred the entry of many items.


So the need of hour is that both the countries aggressively push the agenda of trade to tap the unexplored avenues. The untapped potential will not only bring prosperity in India but will also extinguish the fire of protectionism in US. Clearly the two largest democracies in the world have many more reasons to bolster their cooperation and so overlapping interests demand swift action.


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