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India-US Economic Relations

GS Paper 2

Syllabus: Bilateral Relations


Source: PIB

Context: India and the United States of America held the 5th Ministerial level meeting of the bilateral Commercial Dialogue recently


Various dimensions of India-US Economic relations:

Dimension Examples
Basis of commercial relations ·         Complementarity of India-US economic system

·         3D= India’s Domestic Demand, Democracy and Demography (skilled worker)

·         Common security interests: US supports India’s emergence as a security provider in the Indo-Pacific as a region of peace, stability, and growing prosperity.

Trade ·         India-US bilateral trade is valued at $157 billion (2021)

·         India has a Trade surplus with the US (about $32bn in 2021)

·         Top exports to the US: Pharmaceuticals, Services, precious stones, and machinery

·         Mutual collaboration in sharing of information to tackle offshore tax evasion

Investment ·         The US is one of the largest sources of foreign direct investment in India (FDI inflows of over $46 billion from 2000 to 2021)

·         India is also one of twelve countries partnering with the United States on the Indo-Pacific Economic Framework for Prosperity (IPEF)

Technology and Innovation ·         U.S.-India Initiative on Critical and Emerging Technology (iCET)

·         MoU signed on establishing a semiconductor supply chain and innovation partnership for Supply Chain Resilience.

·         It will complement India’s Semiconductor Mission with US CHIPS and Science Act

·         Agreement on establishing a Semiconductor Sub-committee under Commercial Dialogue.

Energy ·         The US is a supplier of oil and gas to India (become 2nd largest Oil supplier in 2021; Currently: Russia is the top supplier)

·         Both countries will work together in Global Biofuels Alliance and also in hydrogen technologies

·         U.S.-India Energy Industry Network (EIN) for facilitating U.S. industry involvement in the Clean EDGE Asia initiative

·         United States joined the International Solar Alliance

Defence ·         The US is 2nd largest supplier of defence equipment to India (US supplied 16% of India’s imported arms between 2016 and 2020, as per SIPRI)

·         Major defence deals: Purchase of Apache helicopters and P-8I maritime surveillance aircraft, C-17 Globemaster III transport aircraft, M777 howitzers


Challenges in Economic Relations:

  • Imposition of tariffs by the US on Indian steel and aluminium products
  • India’s Atmanirbhar Bharat Campaign has been misunderstood as protectionism
  • Withdrawal of duty-free benefits to Indian exporters under the GSP programme has affected India’s export-oriented sectors
  • US’ hostility towards other countries like Iran and Russia, who are traditional allies of India, has also created differences.
  • India’s purchase of S-400 from Russia and the US’ policy in Afghanistan are also challenges that are affecting the India-US relationship.



The demographic dividend in India provides a significant opportunity for technology transfer, manufacturing, trade, and investment between the US and India. There is huge potential for more commercial partnerships esp. as US companies are adopting the “China Plus One” strategy.


Insta Links



Mains Links

What introduces friction into the ties between India and the United States is that Washington is still unable to find India a position in its global strategy, which would satisfy India’s National self-esteem and ambitions’. Explain with suitable examples. ( UPSC 2019)


Prelim Links

India Government Bond Yields are influenced by which of the following? (UPSC 2021)

  1. Actions of the United States Federal Reserve.
  2. Actions of the Reserve Bank of India.
  3. Inflation and short-term interest rates.


(a) 1 and 2 only

(b) 2 Only

(c) 3 Only

(d) 1, 2 and 3