News / Indian exporters 'euphoric' over prospects from new US trade ties

In another sign of “a clearer strategy” around trade diversification from China, the US is warming to India in a big way.

And it’s an opportunity that Indian exporters believe will drive significant long-term demand for their goods.

The US has, in recent years, become India’s largest trading partner, with fiscal year 2022-23 two-way trade, by value, at some $129bn, up 8% year on year, according to government data.

A recent visit by Indian prime minister Narendra Modi to Washington saw a raft of announcements and deals to push bilateral trade to $500bn by 2030, with US president Joe Biden describing the country-to-country partnership as one of the “most consequential in the world.”

According to A. Sakthivel, president of the Federation of Indian Export Organisations (FIEO), a mutual agreement to settle long-standing disputes at World Trade Organisation level would create a healthy environment to foster trade ties between the two countries.

Some of the tariff actions, in the form of additional customs duty implemented in the past, would be removed to pave the way for greater market access at both ends.

In parallel, New Delhi agreed to lift “retaliatory tariffs” slapped on some 28 US products, notably dry fruits and fresh apples. According to available data, India’s apple imports from the US declined after an additional 20% duty came in 2019 – down from $145.2m in fiscal 2018-19 to $5.27m in 2022-23, by value. Meanwhile, Indian perishables traders have vastly extended their market reach in recent months, with Australian avocados their latest target.

India’s apparel industry also sees an opportunity to grow volumes to the US market, as so-called dual sourcing strategies gain ground.

“The US is the biggest market,” Narendra Goenka, chairman of the Apparel Export Promotion Council, told The Loadstar.  “Therefore, the deeper co-operation has created a positive impact for further business collaboration and stronger economic ties.”

US apparel imports from India swelled 34% year on year in 2022, to $6bn, with the Indian ready-made garment trade share of the US market estimated at 5.7%.

Additionally, US memory chip producer Micron Technology will set up a production facility in India to manufacture semiconductor chips – a $2.75bn project that is expected to go live at the end of next year.

Following talks with the Indian delegation, US automaker Tesla also rekindled interest in manufacturing electric vehicles in India, after an inconclusive outreach in the past. Tesla chief Elon Musk told the Indian team there would be a significant investment announcement soon. Taiwanese manufacturer Foxconn was also seriously considering opening an Indian production site for electric two-wheelers.

Recent massive fleet expansion announcements by domestic airlines Air India and IndiGo are a noteworthy trade boost. Similarly, container carriers have added significant capacity into the India-US tradelane, through larger vessel deployments and newer network additions.

Sunil Vaswani, executive director of the Container Shipping Lines Association (CSLA), also noted that carriers had needed to invest heavily in Indian trades to keep pace with volume surges. That interest hasn’t faded, as Cosco and Wan Hai Lines recently extended their Asian strings to the subcontinent for connections to USEC.