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U.S.-India Insight Summary

Core Content

This document, U.S.-India Insight, Volume 4, Issue 2, April 2014, discusses the implications of the upcoming Indian general elections on U.S.-India economic relations. It highlights the potential for a leadership change in India and the corresponding impact on U.S. trade and investment policies.

Main Points

• Election Timeline: India's national election began on April 7 and concluded on May 12, with results expected on May 16. The opposition Bharatiya Janata Party (BJP) is anticipated to win the most seats, possibly forming the next government.

• Leadership Change: Regardless of the election outcome, a dramatic shift in leadership is expected, which will lead to a new team of policymakers in charge of economic decisions.

• U.S. Trade Concerns: U.S. companies have raised concerns over India's economic policies, including:

  • Forced local manufacturing rules
  • Cross-border tax disputes
  • Local testing and certification requirements
  • Treatment of patents

• Formal Trade Disputes: Several trade disputes have been initiated by the U.S. against India, including:

  • Special 301 Report: Review of India's IPR regime
  • WTO Dispute Settlement: India's National Solar Mission Phase 1 and Phase 2
  • Dumping investigations on pipes for the oil industry and steel threaded rod
  • Review of India's trade, investment, and industrial policies

• Non-Trade Actions: Some Indian analysts argue that the U.S. has also taken non-trade actions that have affected its image in India, such as:

  • Downgrade of India's airline regulator by the FAA
  • FDA bans on generic pharmaceutical imports from certain Indian producers

• Trade Data: Despite these issues, trade data shows positive trends:

  • A +2.0% increase in U.S.-India goods trade (12-month rolling average)
  • A -4.0% decrease in FDI (12-month rolling average)
  • A -71.0% decrease in FII (12-month rolling average)

• Recommendation for U.S. Policymakers: The document suggests that the U.S. should adopt a thoughtful approach to re-engaging with the new Indian government. It emphasizes that while trade concerns are valid, the timing of these actions may not be in the U.S. interest, especially as the current policymakers are likely to leave office.

• Economic Partnership Potential: The new government in India is expected to focus on economic development, potentially opening up new areas for U.S.-India cooperation and economic partnership.

Key Information

• The U.S. and India have a significant trade relationship, with India being the 11th-largest goods trading partner and a key player in services trade.
• Analysts consider India among the top five investment destinations globally.
• The document advises U.S. policymakers to avoid a purely punitive approach and instead focus on forward-looking economic engagement.
• The U.S. should be prepared to set aside current trade concerns and explore new opportunities for collaboration with the new Indian government.

Conclusion

The document underscores the importance of a balanced and strategic approach to U.S.-India relations in the wake of the Indian elections. It advocates for moving beyond trade disputes to foster a stronger, more cooperative economic relationship, especially as the new Indian government may be more open to new partnerships and reforms.