A recent study by Industry Chambers CII highlighted that the services trade between India and the US is expected to cross the 150 billion dollars figure by 2015 as the sector has remained relatively stable despite the global economic crisis.
The CII Study titled 'India and the United States: Trade and Investment Analysis', highlights the recent trends in investment and trade between the two economic giants and proposes an economic agenda for growth and deeper integration.
The study also underscores the various concerns that impede greater economic engagement between the two largest democracies in the world. In the current economic slump India's exports to the US have dropped by 20 per cent, which has severe implications for the more than 150 million people employed in the export sector. Since the US is India's second largest export market, the CII Study urges the US to remove trade restrictions and production subsidies that they have introduced temporarily to counteract the effects of the crisis.
India is also a large beneficiary of US Generalised System of Preferences (GSP) program, designed to promote economic growth in the developing world by providing preferential duty-free entry for about 4,800 products. India's exports under GSP comprise 22 per cent of its total exports to the US, mostly in the gems and jewellery, carpets, auto and truck parts sectors.
The key concern for India is the sudden withdrawal of GSP benefits that have hit hard the labour-intensive industries like gold jewellery, diamonds and brass products.
The study recommends that the US administration reinstate the GSP benefits as exports in these sectors have come down in recent years. In services trade, although exports have grown exponentially to touch 12 billion dollars in 2008, Indian industry is still concerned regarding movement of professionals and non-recognition of Indian professional qualifications in the US.
The CII Study calls for a focused strategy to diversify India's exports into sectors such as financial, entertainment and health and health related services; easing of commercial services requirements by the US and recognition of Indian professional qualifications as laid down by international organisations.
By further liberalising services trade, Indian service providers would gain greater market access into the global arena and the US firms could further rationalise its cost structure and remain competitive in the global market, the study added.However, the study said the investment front would however be critical for building synergies between India and the US. According to it India's FDI outflow to the US outgrew inflow from the US in 2008. US investments in critical infrastructure sectors from roads to electricity, irrigation to telecom is still low and India's investment gap in these sectors is to the tune of 150 billion dollars.
Given US infrastructure investments and expertise in other developing countries, India would gain immensely from US investments in these sectors, it said.
The CII Study recommends aggressive marketing of the Public- Private Partnership (PPP) model to attract US investments and urges that the new bilateral investment treaty (BIT) should create a positive perception of investment opportunities and ensure that the best treatment is provided to investments from both countries.
Source : centralchronicle.com