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U.S.-INDIA TRADE TIES CONTINUE TO DEFY GRAVITY

india trade

U.S.-INDIA TRADE TIES CONTINUE TO DEFY GRAVITY

Despite economic headwinds and each country’s zero-sum approach towards trade, India is firmly among the United States’ ten largest goods trade partners. And it’s a fair bet that the best years for U.S.-India economic cooperation lie ahead.

Sometime within the next two decades, India is likely to become the world’s third-largest economy. Within the next five years, India will surpass China to become the world’s most populous nation and a key global market. Thus, it is no surprise that India is already among the world’s most attractive markets for foreign investment.

U.S.-India Trade in Numbers

Presently, India is the United States’ ninth-largest goods trade partner and has the potential to be U.S. seventh largest goods trade partner in the next decade. In March 2019, bilateral goods trade crossed the $90 billion mark for the first time during any 12-month period. From India’s perspective, the trade relationship is even more important. In 2018-2019, the United States replaced China as India’s top goods trade partner, a position it had lost over a decade earlier. India’s goods trade surplus with the United States in fiscal year 2018-19 was $16.9 billion, more than double the surplus with the next highest trade partner, Bangladesh.

However, this positive story hides a difficult truth — trade did not grow evenly between the first half and second half of the calendar year. Bilateral trade grew 5.2 percent over the full year but contracted over the last six months of 2019 by nearly eight percent. The U.S. goods trade deficit with India widened during the year, from $18.5 billion in 2018 to $23.2 billion in 2019. While that number obviously pales in comparison to the $346 billion goods trade deficit with China or the $100 billion deficit with Mexico, it is the 11th-largest deficit with any U.S. trade partner.

US-India goods trade up

Caught in Global Headwinds

Globally, economic growth remains relatively depressed – even prior to COVID-19. The International Monetary Fund dropped its prediction of India’s economic growth by nearly a full point between July and October 2019 to 6.1 percent. Moody’s had downgraded India’s outlook to negative, “partly reflecting lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses.”

COVID-19 has plunged the Indian economy to 1.9 percent growth this year, though with a forecasted recovery of 7.4 percent growth. Some of the drop in growth and trade over the second half of this year are outside the control of either nation, but the imposition of trade barriers can be controlled, particularly as Prime Minister Modi wishes to attract more foreign direct investment to boost post-COVID-19 recovery.

The government of Prime Minister Narendra Modi came to office in May 2014 for its first five-year term. The government quickly moved on significant reforms, touching on taxation, legal, foreign investment liberalization, and other key investment impediments. However, since its re-election in May 2019, the Modi government has been much less aggressive in pursuing economic reforms while also considering restrictions in areas like data flows and e-commerce that can seriously undermine investor confidence in India.

Similarities Causing Friction

Trade deficits continue to occupy an important place in policymaking in Washington and New Delhi. Both nations’ leaders approach trade as more of a zero-sum proposition and are deeply concerned about protecting — and growing — domestic manufacturing. The worry about a widening trade deficit has often sparked protectionist tendencies from both sides.

In the recent past, Prime Minister Modi has adopted local content mandates in sectors with high levels of imports, raised customs duties in sectors he seeks to protect, adopted price controls on pharmaceuticals and medical devices as well as on credit card fees and airline tickets, and imposed limitations on foreign direct investments in sectors including e-commerce. For its part, the United States included India as part of new tariffs on steel and aluminum, revoked India’s trade benefits under the Generalized System of Preferences (GSP) program and threatened further actions, including placing new limits on technology worker visas.

FDI in India up

Rebounding into a Stronger Relationship

Trade was beginning to slow prior to COVID-19 and the economic effects of the pandemic are yet to be fully realized as the future remains uncertain. But U.S.-India relations have shown surprising resilience and improvements in the face of serious speed bumps.

How policymakers respond to these challenges – whether they choose to erect trade barriers or continue to liberalize – will determine whether both countries can use the opportunity to rebound into a stronger commercial relationship or whether each will retreat, potentially hampering long-term recovery.

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Rossow

Richard M. Rossow is the Wadhwani Chair in US-India Policy Studies at The Center for Strategic and International Studies (CSIS) in Washington DC.

This article originally appeared on TradeVistas.org. Republished with permission.

salt

Asia’s Salt Market – India is the Largest and Fastest Growing Exporter in the Region

IndexBox has just published a new report: ‘Asia – Salt – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the salt market in Asia amounted to $8.3B in 2018, approximately equating the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). The market value increased at an average annual rate of +3.8% from 2007 to 2018; the trend pattern indicated some noticeable fluctuations being recorded over the period under review.

Consumption By Country

China (74M tonnes) remains the largest salt consuming country in Asia, comprising approx. 57% of total consumption. Moreover, salt consumption in China exceeded the figures recorded by the region’s second-largest consumer, India (16M tonnes), fivefold. The third position in this ranking was occupied by Japan (5.7M tonnes), with a 4.4% share.

From 2007 to 2018, the average annual rate of growth in terms of volume in China stood at +1.5%. The remaining consuming countries recorded the following average annual rates of consumption growth: India (+0.8% per year) and Japan (-0.9% per year).

In value terms, China ($5.3B) led the market, alone. The second position in the ranking was occupied by Pakistan ($435M). It was followed by Japan.

In 2018, the highest levels of salt per capita consumption was registered in Taiwan, Chinese (134 kg per person), followed by Turkey (63 kg per person), Saudi Arabia (61 kg per person) and South Korea (53 kg per person), while the world average per capita consumption of salt was estimated at 28 kg per person.

In Taiwan, Chinese, salt per capita consumption remained relatively stable over the period from 2007-2018. The remaining consuming countries recorded the following average annual rates of per capita consumption growth: Turkey (+5.3% per year) and Saudi Arabia (+0.7% per year).

Production in Asia

In 2018, approx. 124M tonnes of salt and pure sodium chloride were produced in Asia; growing by 2.1% against the previous year. The total output volume increased at an average annual rate of +2.3% from 2007 to 2018; the trend pattern remained consistent, with somewhat noticeable fluctuations being observed in certain years. The pace of growth was the most pronounced in 2013 when production volume increased by 14% y-o-y. In that year, salt production reached its peak volume of 124M tonnes. From 2014 to 2018, salt production growth failed to regain its momentum.

In value terms, salt production totaled $8.2B in 2018 estimated in export prices. The total output value increased at an average annual rate of +3.3% over the period from 2007 to 2018; the trend pattern indicated some noticeable fluctuations being recorded in certain years.

Exports in Asia

In 2018, approx. 16M tonnes of salt and pure sodium chloride were exported in Asia; going up by 21% against the previous year. In general, salt exports continue to indicate buoyant growth. The pace of growth was the most pronounced in 2011 with an increase of 44% year-to-year. The volume of exports peaked in 2018 and are likely to continue its growth in the immediate term.

In value terms, salt exports amounted to $528M (IndexBox estimates) in 2018. In general, salt exports continue to indicate prominent growth. The most prominent rate of growth was recorded in 2008 when exports increased by 49% y-o-y. Over the period under review, salt exports reached their maximum in 2018 and are expected to retain its growth in the immediate term.

Exports by Country

India prevails in salt exports structure, reaching 13M tonnes, which was approx. 79% of total exports in 2018. It was distantly followed by China (1,448K tonnes), committing a 9% share of total exports. The following exporters – Kazakhstan (377K tonnes), Turkey (375K tonnes) and Pakistan (301K tonnes) – each finished at a 6.5% share of total exports.

From 2007 to 2018, average annual rates of growth with regard to salt exports from India stood at +25.1%. At the same time, Kazakhstan (+53.6%), Turkey (+26.7%), Pakistan (+18.1%) and China (+5.9%) displayed positive paces of growth. Moreover, Kazakhstan emerged as the fastest-growing exporter in Asia, with a CAGR of +53.6% from 2007-2018. While the share of India (+73 p.p.), China (+4.2 p.p.), Kazakhstan (+2.3 p.p.), Turkey (+2.2 p.p.) and Pakistan (+1.6 p.p.) increased significantly, the shares of the other countries remained relatively stable throughout the analyzed period.

In value terms, India ($227M) remains the largest salt supplier in Asia, comprising 43% of total salt exports. The second position in the ranking was occupied by China ($93M), with a 18% share of total exports. It was followed by Pakistan, with a 9.8% share.

In India, salt exports increased at an average annual rate of +22.2% over the period from 2007-2018. In the other countries, the average annual rates were as follows: China (+9.1% per year) and Pakistan (+28.6% per year).

Export Prices by Country

In 2018, the salt export price in Asia amounted to $33 per tonne, dropping by -2.5% against the previous year. Overall, the salt export price continues to indicate a noticeable downturn. The growth pace was the most rapid in 2008 when the export price increased by 26% year-to-year. In that year, the export prices for salt and pure sodium chloride reached their peak level of $63 per tonne. From 2009 to 2018, the growth in terms of the export prices for salt and pure sodium chloride failed to regain its momentum.

Prices varied noticeably by the country of origin; the country with the highest price was Pakistan ($171 per tonne), while India ($18 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by Pakistan, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform