By Arun Kumar, IANS,
Washington: A noted Indian-American economist has suggested initiating deeper bilateral trade integration between India and the US given the enormous potential for trade and investment because of India’s unexploited growth opportunities.
Growing close to nine percent in the last decade, India has emerged as a major power with an economy ($4.7 trillion) that in 2012 became the world’s third largest in purchasing power terms, Arvind Subramanian told a Congressional panel Wednesday.
“Surpassing Japan and now behind only China and the United States, India’s trade in goods and services is close to a trillion dollars, and expected to double every seven years,” noted Subramanian, senior fellow, Peterson Institute for International Economics and Centre for Global Development.
“This dynamism has expanded opportunities for US business,” he said, noting US exports of goods to India have increased close to 700 percent in the last decade and exports of services have doubled in the last four years.
“US foreign direct investment (FDI) has increased from $200 million to $6 billion,” Subramanian said. “Moreover, trade and FDI flows between the two countries are balanced, minimising the scope for macroeconomic and currency-related tensions.”
To exploit India’s potential of infrastructure investment of about a trillion dollars and its growing demand for services, he suggested a multi-pronged strategy for solving trade conflicts and maximizing the underlying potential.
“There is merit in initiating deeper bilateral trade integration between India and the United States as a framework for giving recognition to the broader strategic imperative of closer cooperation between the two countries,” Subramanian said.
This may also be used “for pursuing further liberalisation in both countries and for reversing the discrimination that each is inflicting on the other”, he said.
However, in Subramanian’s view “India’s challenging regulatory environment is unlikely to see major improvements in the short to medium term”.
US business will thus have to learn to move outside its comfort zone to navigate an Indian market or risk “losing out to firms from other countries in one of the world’s largest and most dynamic markets”, he said.
Arun Kumar can be contacted at [email protected])