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Introduction

India – U.S. Trade and Economic Relations . Dr. V.S. Seshadri, Minister (Commerce), Embassy of India, Washington DC. Prepared for Virginia Governor Mark Warner and the Commonwealth of Virginia Trade Delegation to India. Introduction.

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Introduction

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  1. India – U.S. Trade and Economic Relations.Dr. V.S. Seshadri, Minister (Commerce), Embassy of India, Washington DC. Prepared for Virginia Governor Mark Warner and the Commonwealth of Virginia Trade Delegation to India. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  2. Introduction • Positive and growing relations between world’s two largest democracies • Trade, Investments and technology issues are increasingly playing an important role in bilateral relations • Institutional framework for cooperation gathering substance and momentum. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  3. INDIAN ECONOMY: HIGHLIGHTS • World’s largest democracy in action • Fourth largest economy (US$ 3 trillion GDP) in terms of Purchasing Power Parity • Second fastest growing economy of the world at present. • Share of India in the World economy is estimated to rise from 6% to 11% by 2025 • Current Foreign Exchange Reserves at $ 140 billions • By 2050, India is slated to emerge as the world’s thirdlargest economy. • During 2004-05, Indian economy is expected to grow at 6.9% against the advance estimates of 6.2%. This is over 8.5% growth achieved in 2003-04. • The present government set a target of 7-8% economic growth per annum in a sustained manner. • Growth accompanied by continued price stability Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  4. Commitment to liberalisation • Since 1990, steadfast commitment to economic reforms and steady progress on liberal economic and trade policies • Peak customs tariffs came down in a space of two years from 29% to 15% • Foreign Direct Investment welcomed with some exceptions • $ 3.32 billion FDI in first nine months of Current Fiscal Year compared to US$ 2,81 billion in whole of FY 2003-04 • Hike in FDI caps • Telecom from 49% to 74% • Banking FDI in private banks raised to 74% • Civil Aviation sector increased from 40% to 49% • 100% FDI allowed in construction sector • FDI in insurance is under active consideration Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  5. INDIAN ECONOMY IN TRANSITION • FDI in India • From US$ 143.6 million in 1991 to US $ 38.98 billion as on August 2004. • Portfolio flows accounted for nearly 77% of net foreign investment inflows in 2003-04. • Forex reserves of more than $ 140 billion (March 18, 2005 ) • Foreign Exchange Reserves now exceed Foreign Debt. • External debt to GDP ratio has come down from 38.7% in 1992 to 20% in 2003 • Since July 2003, India has become a net creditor to IMF, after having been a borrower in the past • Inflation has been contained at 4.6% in 2003-04. Presently it is around 5.3% particularly due to global increase in oil prices. • India’s imports to exceed US$ 100 billion in 2004-05 and exports to exceed US$ 75 billion Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  6. India-US Bilateral Merchandise Trade (2001-04) • Steady rise in the two way trade – double digit growth rates for the last two years (US 22% and India 19%) • USA is India’s single largest trading partner • In USA’s global trade, India is the 18th largest exporting Partner & 24th largest export destination • Share of India-US trade in US Global trade is less than 1% Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  7. US Exports to India (2001-2004) Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  8. Composition of US Exports to India (Merchandise goods) Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  9. Issues affecting Merchandise Trade • US trade defense measures • Anti Dumping (CVP 23, Shrimp, PET Resins) • CVD investigations (PET, CVP 23) • Administrative Review (Five cases) • Impact on trade, Shrimps decline by 60% • Sanitary & Phyto Sanitary (SPS) measures (mangoes) • GSP regime –IPR • WTO Related issues • Textile monitoring Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  10. Trade In Services Nature of trade • Statistics have a time lag (2003 figures come in October 2004) • Compilation is more complex in nature – trade takes place in four modes: cross border, consumption abroad, commercial presence and movement of natural persons • The trade in services is considered part of “invisibles”. • it is difficult to fully track the figures for services trade. • The US figures for trade in services include wide basket of services, of which software and IT related services form one component. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  11. Trade In Services • As per US Bureau of Economic Analysis (BEA), US enjoyed surplus in trade in services during 2002. While US exports were $6.8 billions, India’s exports to the US amounted to $3.5 billions. • As per NASSCOM, the Indian exports of the software and IT related services to North America (which includes USA) were $ 6.6 billions during the period 2002-03. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  12. Issues Relating to Trade in Services • Concern in some US quarters about ‘outsourcing’ • Data and Privacy protection Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  13. Indian IT Industry Approach • NASSCOM interaction with US trade bodies and relevant US agencies • Appropriate amendments to India’ IT Act of 2000 in terms of privacy protection and cyber crimes under consideration • Strengthening the enforcement regime • Cooperation with like minded organizations (US industry and business councils) in dispelling myths about Offshoring Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  14. India-USA Investment RelationsFDI from USA to India • USA is one of the the largest foreign investors in India. • FDI inflow from U.S. ($ 3.9 billion) constitutes about 13% of total FDI inflows into India. • Top sectors attracting FDI from USA are: • Electrical Equipment (Computer Software & Electronics), • Fuels (Power & Oil Ref.), • Food Processing Industries, • Transportation industry, • Service Sector (Fin. & Non-Fin. Services) and • Telecommunications Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  15. FDI from USA to India (Upto July 2004) Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  16. FDI from USA to India (upto July 2004) Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  17. Some of the Major and Successful Fortune 500 Companies of USA in India • Coca-Cola • Ford Motor Company • GE Capital • Merill Lynch & Co. • J.P. Morgan & Co. • The Procter Gamble • COMPAQ Computer • Hewlett Packard • AT & T • Citicorp • Bank of America • Hughes Electronics Corp • Johnson & Johnson • Qualcomm • Sprint These are just examples. There are many others Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  18. FDI from USA to IndiaFurther Scope • Although foreign direct investment from USA to India is rising, India’s share in the total FDI outflow from USA was only 0.24% in 2002. • This leaves a large scope for attracting higher investments from USA particularly in priority areas like infrastructure, IT, Telecom, energy and other knowledge industries such as pharmaceuticals and biotechnology Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  19. India-USA Investment RelationsPortfolio Investment from USA to India • USA has emerged as the leading investor in Portfolio Investment in India as well. • As of June 30, 2004, US based FIIs have made a net investment of nearly $ 10.2 billion in the Indian capital markets accounting for about 40.5 percent of the total net investments made by the FIIs since 1993. • The portfolio inflows witnessed a rapid rise in 2003-04. This has been due to buoyant state of India’s capital markets and greater FII participation. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  20. PORTFOLIO INVESTMENT FROM USA TO INDIA Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  21. India’s Investments in USA • Since 1996 and upto June 2004, the total approved Indian investment abroad amounts to US $ 10891.26 mln. of which 57.4% has been the actual outflow • US share ($ 2047.63 mln.) constitutes 18.8% of the total approval • Several of India’s IT companies have offices in US • In addition, Indian companies have also begun to make investments in other areas including in the manufacture of tractors (Mahindras), pharmaceuticals (Ranbaxy, Dr. Reddy’s, etc), laminated tubes (Essel Propack), Tea (Tata tea), etc. Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  22. India’s Investments in USA Indian Companies in USA in IT Sector • WIPRO, INFOSYS, TCS etc • Bombay's Datamatics Technologies Ltd. • Indecomm Global Services • Godrej Group • Essar Group  • SSI Ltd • Subex Systems • E4E Indian Companies in USA in other Sectors • Indo Rama - PET plant in North Carolina • Amtek Auto – acquired 100% equity in New Smith Jones Inc in US, which makes ring gears and flex plates. • Ranabaxy has set up two subsidiaries Ranbaxy Pharmaceuticals Inc. (RPI) and Ohm Laboratories Inc. (OLI) • DR Reddy’s Labs • United Breweries acquired 6 micro breweries in the US • Essel Propac in Virginia • Mahindra & Mahindra Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  23. Institutional Framework for India-US Commercial & Economic Cooperation High level Coordinating Group (to develop common economic agenda and prepare for Heads of Government meetings) Prime Minister Office (PMO) with MEA (India) & White House with State Department (USA) US-India Financial & (to focus on strengthening cooperation in the financial sector to mutual advantage and review developments in the capital markets for promoting economic cooperation) Finance Minister(India)  Secretary of Treasury (US) US-India Commercial Dialogue (to facilitate trade, maximize investment opportunities across various sectors and to provide a forum for discussing the emergent issues affecting bilateral trade.) Minister for Commerce & Industry (India) Secretary of Commerce (US) US-Indian Working Group on Trade (to enhance cooperation on trade policy, examining individual trade issues in greater depth with the participation of other agencies having corresponding responsibilities and through creation of sub-groups) Ministry of Commerce/ other Deptts. (India) US Trade Representative Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  24. Some more forums for bilateral cooperation. • In addition to the above, (a) Joint Consultative Group on Clean Energy and Environment; (b) US-India Science & Technology Forum and (c) High Technology Cooperation Group (HTCG) • Objective : Promoting cooperation in High Technology So far three meetings held since 2003. The fourth meeting is scheduled to be held in May 2005 Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

  25. THANK YOU Orientation -- Governor Mark Warner's Trade Mission to India Richmond, VA. 6 April 2005.

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