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Bilateral U.S.-India trade in goods and services grew to $146.1 billion in 2019 from $142.6 billion in 2018. In 2019, Indian GDP growth slowed to 4.8 percent (from over 7 in 2018), demonstrating that India faced an economic slowdown prior to the COVID-19 pandemic. The United States remained India’s largest trading partner in 2019, with exports of U.S. goods and services to India of $59.6 billion, and imports from India at $87.3 billion. The United States also remained India’s top export market while India was the 12th biggest export market for U.S. goods last year. The United States has a persistent trade deficit with India ($27.7 billion in 2019). For 2020, the year started on a positive note with an increase of 14.8 percent in U.S. goods exports to India in January and February compared to the same period last year. However, as the pandemic’s onset took a toll on the global economy, U.S. goods exports to India fell by 46.2 percent (goods imports from India dropped by 34 percent) from March to June compared to the same period in 2019.
India-sourced foreign direct investment into the United States was valued at $16.7 billion in 2019, a strong increase from the previous year. India’s direct investment in the United States is led by professional, scientific & technology services, but also includes depository institutions, and manufacturing. U.S.-sourced FDI into India was valued at $46 billion in 2019 but much U.S. investment enters the country from third-country destinations. The first seven months of 2020 saw major investment announcements in the tens of billions of dollars by U.S. multinationals such as Google, Facebook and Amazon. U.S. companies directly employ 1.3 million Indians and support an estimated 6 million jobs across the country. U.S. companies are the largest foreign investors and employers in India.
Most major U.S. companies are active in the market. In addition to the Government of India’s (GOI) “Make in India” program, meant to reduce foreign imports in favor of domestic production, Prime Minister Narendra Modi announced “self-reliant India” during the country’s COVID-19 lockdown to bolster Indian businesses and employment. U.S. companies may find it even more difficult to sell their goods and services, due to those policies and the resulting regulations and business practices. In August 2020, the Ministry of Defense listed 101 items prohibited from importation as part of the “self-reliance” movement. Moreover, India has enacted various market access barriers, such as tariffs, price controls, and import restrictions. To succeed in India, U.S. companies often find local partners exceedingly helpful.
Market challenges notwithstanding, India offers ample opportunities for U.S. companies to prosper and the potential to increase bilateral trade is enormous. Indian conglomerates and high technology companies are generally equal in sophistication and prominence to their international counterparts. Indian companies in industrial sectors such as information technology, telecommunications, pharmaceuticals, textiles, and engineering, are globally recognized for their innovation and competitiveness. U.S. companies operating in India emphasize that success requires a long-term planning horizon and a state-by-state strategy to adapt to the complexity and diversity of India’s regional markets.