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Home / India News / US manufacturing supply chain can shift from China to India: Report

US manufacturing supply chain can shift from China to India: Report

CII and USIBC on Tuesday launched the “$500 Billion Roadmap,” a report that provides an assessment of current trends in US-India trade and the policy reforms needed to set business ties on a faster growth trajectory.

india Updated: Feb 25, 2020 22:05 IST
HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
The CI I in association with US India Business Council (USIBC) has listed out interventions in 13 specific areas which, if resolved, will provide a significant thrust to trade between India and the US by turning challenges into opportunities.
The CI I in association with US India Business Council (USIBC) has listed out interventions in 13 specific areas which, if resolved, will provide a significant thrust to trade between India and the US by turning challenges into opportunities. (REUTERS / Representational Photo )

The trade tension between the United States and China is seen as an opportune time to give a major fillip to India-US trade relationship as many American companies are actively exploring alternative investment destinations to relocate their manufacturing supply chains and India could be a competitive destination, a report has said.

The report by the Confederation of Indian Industry (CII) in association with US India Business Council (USIBC) has listed out interventions in 13 specific areas which, if resolved, will provide a significant thrust to trade between the two countries by turning challenges into opportunities.

The interventions range from reinstating Generalized System of Preferences (GSP) benefits by US for India, bringing down import duties on high-end motorcycles to 0%, arriving at a consensus on a pricing mechanism for medical devices, modifications in India’s E-Commerce Policy, removing high tariffs on steel and aluminium imports by the US, fostering greater cooperation in strengthening partnership in defence and aerospace among others.

“However, for this to materialize, both sides have to look at the challenges in the relationship as opportunities for growth and look for creative solutions to break the logjam wherever possible,” the report said.

CII and USIBC on Tuesday launched the “$500 Billion Roadmap,” a report that provides an assessment of current trends in US-India trade and the policy reforms needed to set business ties on a faster growth trajectory.

Specifically, the report has listed out 13 policy interventions to help boost trade between the two economies. The report also includes several case studies of “green field” growth potential in areas outside of the traditional industry verticals, apart from headlining three scenarios to reach the $500 billion target in bilateral trade.

“There is an increased focus on fostering greater synergies in the economic relationship between India and the US. This is evident from the fact that the two-way trade between India and US has grown at an impressive compound annual growth rate (CAGR) of 11.8% over the last two decades,” CII’s director-general, Chandrajit Banerjee, said.

“However, to achieve the shared goal of reaching $500 billion in the trade from the current $142 billion in 2018 would require a renewed focus on tackling some of the irritants to unleash the full potential of the economic relationship,” he added.

“This report undertaken by CII and USIBC outlines the steps needed to facilitate greater trade and opportunity sectors that can unleash $500 billion in two-way trade between the U.S. and India. We have seen trade grow by over 50% in the past 5 years. But in order to see a doubling and tripling of the trade relationship, the two countries must work out a trade deal that can open markets in both directions,” USIBC’s president, Nisha Biswal, said.

Aside from trade, investment ties between the two economic behemoths also remain solid—cumulative US foreign direct investment (FDI) into India amounted to roughly $44.5 billion in 2017, 15.1% jump from 2016.

However, in order to boost investment levels further, additional steps are required by the Indian policymakers in the form of further streamlining and simplifying the Single Window Clearances, instituting a mechanism of Automatic Deemed Approvals for NOCs, further liberalisation of FDI norms among others.

Further, in the report, USIBC and CII have identified few areas where emerging market segments, technologies and collaborative ventures can yield benefits for the US-India trade, as well as help tackle global development challenges.

These niche sectors include the following: (i). Harnessing the blue economy by expanding trade in maritime and marine activities, (ii) pushing the sports economy by tapping the opportunities presented in promoting US-India engagement in sports activities, (iii) greater collaboration in space industry, (iv) capitalising on the immense potential of the US-India tourism scenario and (iv) focusing on collaborating in the areas of sustainability and environment.

Specifically, the report has also laid out the following three possible scenarios for pushing the India-US trade to the envisaged $500 billion target from the current print of $142 billion in 2018.

1). The ‘Limping’ scenario assumes a deterioration in the India-US trade relationship. Accordingly, bilateral trade grows at a CAGR of 3.9% over the next several decades, crossing the $500 billion mark only in 2052.

2). Under the ‘Chugging’ scenario, the bilateral trade relationship and key drivers of economic growth largely remain unchanged from the current status quo, bringing the bilateral relationship to $500 billion by 2035. The implied growth rate is 7.9% over the 2019–2035 period.

3). The ‘Soaring’ scenario assumes positive policy and regulatory moves and a significant increase in positive trade engagement, bringing bilateral trade growth to 11.8% and reaching the $500 billion mark by 2030.