The US has said that the Indian market is not spurring enough demand for its imports compared to China. Blaming the slowdown in the country’s GDP during financial year 2016-17 compared to the year before, the US said India has been unable to create effective linkages like what China has achieved.
USITC review report
“India’s economic growth also slowed, decreasing from 7.9 per cent in 2015 to 6.8 per cent in 2016. Although it still had one of the highest growth rates in the world in 2016, India has notably fewer linkages to the global economy than China does… As a result, India’s economy does not spur strong demand for imports,” stated a 2016 Annual Trade Review Report by the US International Trade Commission (USITC) released recently.
The report said this is because India’s services sector accounts for much of its growth, and it has a relatively small manufacturing sector and a per capita income of $6,590 in 2016. USITC is an independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade. This comes in the backdrop of the Trump administration getting vociferous against India for its rising trade deficit of around $24.3 billion.
Top trading partner
The USITC said that in 2016, India emerged as its top trading partner with which it has its largest services trade deficit, largely due to import of computer services. “Although India was again the US’ seventh-largest single-country services trading partner, based on two-way trade, it continued to be the only top trading partner with which the US has a services trade deficit,” it said.
In 2016, US exports again rose slightly more than its imports of services, which resulted in a 1.6 per cent decline in the services trade deficit to $6.8 billion. Total US services trade with India grew 10.3 per cent to $46.7 billion in 2016, the report said.
It also highlighted the need to relax local-sourcing requirements in single-brand retail trade to boost investments from the US into India’s services sector.
Still in priority list
It also noted that India remained on the Priority Watch List in the 2016 Special 301 Report due to concerns about weak protection and enforcement of intellectual property rights (IPR).
“Of concern are inadequate trade secret protection, the production, domestic distribution, and export of counterfeit pharmaceuticals and online piracy,” it said.
India has been on USTR’s Priority Watch List or has been designated a priority foreign country since 1989.