Addressing Protectionist Measures in Indo-US Trade
iasparliament
February 24, 2018
What is the issue?
Commercial relationship between US and India is hindered by few protectionist measures.
New reforms needs to be introduced to address the concerns in Indo-US trade.
What is the status of Indo-US trade relations?
Over the past decade, two-way merchandise trade has grown from $44 billion to $74 billion.
For a point of comparison, taking US-China trading relationship the trade topped $635 billion in 2017.
US-India trade was 10 per cent the size of US-China trade, now the trade is at 11 per cent as large, India aim much higher.
India can seize the strategic opportunity through trade and investment to become an alternative hub for US business in the Indo-Pacific.
What are the visions on India’s trade activities?
Economic Survey 2017-18 pointed out, India’s projected economic growth is between 7 per cent and 7.5 per cent for 2018 and 2019.
Inflation is down a bankruptcy code is helping resolve stressed assets issues, and the goods and services tax (GST) has resulted in widening the indirect tax base.
India has emerged as a strong geo-economic player, there are signs of India transitioning into an innovation-led economy, with more start-ups.
India is now witnessing enhancements in global benchmarks in the World Bank’s ease of doing business index, Moody’s rating, the global innovation index, or the global competitiveness index.
At a time when foreign direct investment is lower globally, India recorded the highest inflow of FDI in 2016 at $60.1 billion.
The Government has fast-tracked 200 infrastructure projects worth $140 billion, backed by technology-driven and e-governance initiatives.
What protectionist measures concern Ind0-US trade?
India - India leaves the opportunities for mutually beneficial growth and job creation untapped, India not been able to accelerate two-way trade between global economies.
Instances such as blunt imposition of price controls, unpredictable tariffs on agriculture or electronics products, and preferential market access for domestic companies is concerning the trade.
A challenging environment that does not consistently protect intellectual property is deterring further foreign investment.
The Government’s decision to continue the price control policy portends a continued downward trend in life sciences sector.
US - Recent proposals to restrict legal immigration and calls to unilaterally impose tariffs have the potential to disrupt a mature trading relationship that the US enjoys with its partners.
What measures needs to be taken?
Resolving transfer pricing disputes, updating the US-India bilateral tax treaty, and overhauling tax litigation and administrative processes will promote trade.
India’s financial markets must continue to mature and deepen to support the economic growth.
Bond market reform are needed for companies and investors to deeper the capital resources and the investment diversification.
To rise to its full potential, India will require a renewed focus on reforms and a more open trade architecture.
