November 16: The US-India Economic Partnership: Issues and Opportunities

November 16, 2011: Pravakar Sahoo
Pravakar Sahoo at the EWCW
(Click to enlarge) Fall 2011 South Asia Fellow, Dr. Pravakar Sahoo, explained the macro-view of the US-India economic relationship at the East-West Center in Washington.

The US-India Economic Partnership: Issues and Opportunities

WASHINGTON DC (November 16, 2011) In the decade from 2001 to 2010, the value of trade between the United States and India grew four-fold, making India the twelfth largest US trading partner. Having intensely researched bilateral trade, investment, and future cooperation prospects between these two significant economies, visiting fellow Dr. Pravakar Sahoo argued that while trade and investment constitutes the core of the Indo-US strategic dialogue, such cooperation in its current form lacks focus. Despite this, he feels a lot can be done to strengthen the US-India economic partnership.

Dr. Sahoo identified a number of issues in US-India trade relations that are common to many bilateral trade partnerships, particularly frustrations over protected markets, stringent regulations, and procurement laws. Both India and the US, for instance, claim that phytosanitary and packaging regulations are keeping certain agricultural exports out of the other’s markets. India feels that US visa limitations form a barrier to the American service industry, while US companies are skeptical of India’s protection of intellectual property rights.

Challenges also face bilateral foreign direct investment. While US companies have invested in nearly all sectors of India’s economy, and within five years India has become the second fastest growing investor in the US after UAE, India only enjoys a quarter of the amount of FDI that China does. Dr. Sahoo points out that while India has recently reformed its investment policy to better facilitate it, investment in India meets trouble in inadequate infrastructure, archaic labor laws, and a lack of coordination between the center and the states. He feels these can be remedied through the better design and planning of Special Economic Zones, an investment facilitation desk in every Indian state to assist investors, and expediting the proposed Bilateral Investment Treaty (BIT).

Dr. Sahoo concluded that while bilateral trade and investment between the US and India still faces numerous challenges, it is in their mutual best interest to work through them and move toward a comprehensive economic partnership. He expressed that the US may be missing out as India enters into such trade agreements with other nations such as Japan and Malaysia, and that “faster movement toward a U.S.-India BIT could improve prospects for American investors, as well as reassure those in Asia who question the U.S. commitment to a long-term economic role in the region.”

Pravakar Sahoo is an Associate Professor at Institute of Economic Growth (IEG), at Delhi University, and the Fall 2011 South Asia Fellow at the East-West Center in Washington. Prior to joining IEG in February 2009, he served as a senior fellow at the Indian Council for Research on International Economic Relations (ICRIER). He has published a number of research papers in numerous national and international journals, including: the Journal of International Trade and Economic Development, Journal of Asian Economics, International Economic Journal, and the Singapore Economic Review, on issues ranging from to development economics and regional cooperation, to international trade investment. Throughout his career he has acted as a consultant to various national and international agencies, including teaching macroeconomics to high-level government officials and policy makers in the Indian Economic Service and Indian Statistical Service.