US, India's favourite export destination

The United States has emerged as the most preferred destination for Indian exports, says a Confederation of Indian Industry study on "India and the United States - Economic Analysis and Trade Strategy."

India's exports to the US have been increasing steadily over the years since 1993,with an average annual growth rate of around 11 per cent per annum. and the country is ranked 17th in the list of exporters to the US, according to the CII study. India's exports, which are 1.6 per cent of total US imports, amounted to $ 13 billion in 2003.

In contrast, India appears to be a less significant export destination for the US and the country ranks 24th in the overall US list of export destinations. However, India is steadily emerging as an important market for the US, adds the study.

The CII study says in ten years during 1993-2003, US exports to India have grown at an average rate of around 6 per cent annually, significantly buoyed by India's removal of quantitative restrictions in 2000. US exports to India in 2003 amounted to $ 5 billion.

The balance of trade between India and the US has continued to remain in India's favour. This is not surprising given the vast disparity in per capita income between the two countries and their relative capacity to import goods and services, adds the CII study.

The CII study says there has been very little diversification of products exported to the US. Indian basically exports gems and jewellery, textile and clothing products, carpets and rugs etc. US on the other hand exports electrical machinery and parts, and optical and photographic accessories.

Adding a word of caution, the study said if the government was keen on significantly increasing exports, then it needs to focus on diversification of products.

US needs to address issues like high tariffs particularly in food products, rules of origin affecting exports of textile products, denial of Generalised System of Preferences benefits to some critical sectors namely, textiles, gems and jewellery and anti-dumping duties on export of iron and steel.

India too needs to work on overall high tariffs, higher transaction costs and the need to encourage trade facilitation, India's large negative list of imports, remnants of the licensing system in some sectors and lack of adequate Intellectual Property Rights protection regime.

The CII study also points out that India, given its dynamism in the services sector, has an insignificant share in US imports of cross-border services (0.7 per cent for the year 2002), while India's share in US exports is 1.91 per cent.

According to the Study, the major issues in the bilateral trade in services include - the 'Totalisation Agreement' between India and the US which is yet to be finalised and issues regarding H1-B visas and L-1 visas, which need to be sorted out, preferably by US employers. Also, availability of reliable and timely data is an impediment to trade, points the CII study says.

The study says, the target for 2010 should be $65 billion for merchandise exports and $40 billion for service exports.