India Illustration: Liu Rui/GT
US Treasury Secretary Janet Yellen embarked on a trip to India on Tuesday, during which her agenda will include participation in the US-India Economic and Financial Partnership dialogue in New Delhi. and a meeting with Indian Finance Minister Nirmala Sitharaman, Reuters reported.
Yellen’s visit came at a time when the Indian economy has outperformed others amid continued global economic turmoil. India’s economy is expected to grow 6.8 percent this year, in stark contrast to the 3.2 percent forecast for the world as a whole, according to IMF data.
The Indian manufacturing boom appears to be beginning to bear fruit and is showing strong momentum. Last week, Apple’s contract manufacturer Pegatron began assembling iPhone 14 models in India, becoming the second Apple supplier to produce the iPhone 14 in the South Asian country, Bloomberg reported.
Given India’s economic potential, it’s no surprise that the US wants to deepen economic ties with the country, but the problem is that the two countries’ goals for their economic and trade relationship are actually at odds. . Furthermore, by stepping up engagement with India, the US’s biggest target still appears to be China.
Take Yellen’s visit to India as an example. With an informed focus on the similarities of the world’s two largest “democracies,” Yellen is expected to discuss strengthening supply chains through “hosting friends,” a term used to describe the diversification of supply chains from China to US allies
The rhetoric may be welcomed by some Indians, but it could also serve as a reminder to India that the importance the United States has placed on the country may have more to do with geopolitics than India’s economic strength. It is no secret that both the US and India are heavily dependent on China’s supply chains, and the US attempt to lure in allies like India to undermine China’s industrial chain is clearly meant to serve to its own global strategy, not to China’s economic interests. others.
India will only harm its own interests if it follows the US strategy of weakening its industrial and trade chains with China. In fundamental terms, despite the apparently closer political and security ties between the US and India in recent years, Washington still sees India as more of a geopolitical pawn to contain China and implement its so-called Indo-Indonesia strategy. Peaceful. The best proof of this is that the Biden administration has moved away from extending market access or striking a new trade deal with India.
Clearly, this is not what India hopes to get from “close ties” with the US India has been calling on the US to reinstate GSP (Generalized System of Preferences) benefits for its exporters, and has been pushing for a bilateral free trade agreement with the US. However, both the previous Trump administration and the Biden administration seem uninterested in such an agreement.
In fact, the limited progress and unresolved disputes on economic and trade issues between the two countries are evidence enough to show that their mutual trade needs are not on the same path, which is why it is difficult for trade between the US .and India to develop smoothly. .
Some may argue that the US is one of the few countries with which India has a trade surplus, which has been increasing in recent years. However, given the fact that the US economy is turning inward, India needs to be careful that its growing surplus may prompt the US to build more protectionist barriers or even trade sanctions against India in the future. future. To put it bluntly, India shouldn’t be buying what the US is selling during Yellen’s trip.
Under such circumstances, to maintain its growth momentum, it is essential for India to improve its domestic environment for foreign investment by improving labor skill levels and improving its logistics and transportation systems. That, to some extent, could increase its bargaining power when it comes to trade talks with the US. Meanwhile, India also needs to diversify exports through more active participation in the Asia-Pacific industrial chain.