5 November 2024

US-India Economic Ties: To the Next Level and Beyond

Aparna Pande

Trade and Investment

Strengthening trade and investment ties between India and the United States requires a multifaceted approach. India has recently deployed schemes known as production-linked incentives (PLIs) to attract companies to set up manufacturing facilities in priority or strategic sectors—including electronics, pharmaceuticals, textiles, and white goods. Despite measures like PLIs, India’s manufacturing growth has remained relatively stagnant. India would benefit on a much broader scale by limiting PLIs and instead focusing on simplifying import and export processes and reducing import duties and tariffs to create a more open trade environment. The government’s recent announcement that it is simplifying processes through a single-window system, for example, will benefit not only large firms but also small firms that aspire to list on global platforms. India can also experiment with land acquisition and labor market reforms in select states before rolling them out countrywide. Additionally, New Delhi should invest more in critical infrastructure, such as freight rail and deep-water ports, to support economic expansion. To further attract investment and boost exports, at a time when there is a favorable geopolitical situation, the country would benefit from a regulatory system that is more predictable, transparent, and easier to navigate. Fostering state-level relationships and focusing on co-development could further enhance collaboration. For its part, the US should work to restore the effectiveness of the World Trade Organization (WTO) and avoid weaponizing international trade. Making globalization work more effectively is key to promoting interconnectivity and resilience.

No comments: