Tag Archives | India-US relations

India’s unusual trade pattern with the United States

Richard Rossow (via Milan Vaishnav) shared the latest US-India trade in goods data updated by the US Census Bureau.

India has a running trade deficit in goods: where it imports more goods than its exports. It is wrong to simplistically judge whether a trade deficit is good or bad – however, India does do ‘better’ when it comes to its services.

However, today this blogger learnt that the trade relationship that India has with the United States of America is quite different from that with many other big trading partners. India’s large software and services exports to the US are well-known, but India exports more goods to the US as well. Little wonder that American businesses lobby hard in Washington to be able to trade more and operate more in India.

In 2014, for the first time since 2006, India’s exports to the US are more than double its imports. It is currently unclear as to what to attribute this towards and pass judgement on whether this is a good or a bad thing. The broad trends in the two economies in the last 4 years has been one of revival and renewed growth in the United States, and faltering growth and investment in India.

India-US Trade1The timeline of imports and exports from the 1980s onwards has a few points of interest from recent years. The most prominent of these is the dip in 2009 of both Indian exports and imports, with the former affected far more than the latter. This was preceded by a sharp rise in 2007 in Indian goods imports from the US.

While Indian exports to the US bounced back since 2010, Indian goods imports plateaued in 2011 and have dropped a little in real terms since then.

The USTR website on India-US trade relations says that India’s largest goods exports to the US are precious stones (diamonds), pharmaceuticals, mineral fuel, organic chemicals and others. India’s largest goods imports are again precious stones (diamonds and gold), aircraft, machinery and optical and medical instruments.

A closer examination of export and import trends in types of goods (using the US Census Bureau’s “end use” dataset) provides the following:

1. Since 2009, the largest growth in highly traded Indian goods exports to the US as of 2013 are:
– Petroleum products, other
– Tobacco, waxes, etc
– Fish and shellfish
– Fuel oil

2. Since 2009, the largest growth in highly traded Indian goods imports from the US as of 2013 are:
– Complete military aircraft
– Gem diamonds
– Nonmonetary gold
– Newsprint
– Parts for military-type goods

3. Since 2009, the largest fall in highly traded Indian goods imports from the US as of 2013 are:
– Civilian aircraft, engines, equipment, and parts
– Chemicals-fertilizers
– Steelmaking materials
– Computers
– Drilling and oilfield equipment

I encourage readers to comment on the significance of some of these observed changes.

There’s a lot more information waiting to be unearthed from these datasets, including information on when Indian defence imports of US equipment really increased and to what extents. The defence angle is particularly interesting as the Indian ministry of defence is quite opaque in defence spending and is known to defer capital payments while making large announcements.

Readers are welcome to use the full rich XLS spreadsheet that I have compiled on all the data from the US Census Bureau relevant to the last couple of decades of India-US trade.

Addendum: The US$-Indian Rupee exchange rate has been steadily rising, making imports from the US less competitive. This could perhaps explain a part of the slump in US goods imports by India.

PS. All years used in this post are calendar years and not financial years.

Comments { 1 }

Education and bilateral relations

A significant number of Indian students in the United States add great value to both countries, while flying under the radar of bilateral policymaking.

Migration is the foundation stone of India-US relations, if not the bedrock itself. Indian immigration into the United States of America has come a long way since Bhagat Singh Thind fought for citizenship in US courts about 90 years ago.

While the China-US economic relationship leans heavily on trade via the movement of goods, the India-US economic relationship is based more on the movement of people and services. Apart from a sizeable population of Indian origin in the US of about 2-3 million, Indian citizens also form the highest number of H-1B and L-1 visas, both dominated by technology and software professionals.

At Takshashila, we recently had an excellent talk on US immigration policy by Edward Alden, Senior Fellow at the Council for Foreign Relations. This blog post is limited to a few observations on immigrant Indians studying in the US on student visas.

A little over 23,000 Indians availed a US student visa in FY2012, less than 5 percent of the overall student visas issued in the country. This is down from FY2007 as the chart below shows, when Indian students availed more than 10 percent of all student visas issued. In contrast, Chinese students are being issued with visas at a rapidly increasing rate since 2007, and now hover close to 200,000 student visas a year.

US F1 Visas Total

This rapid increase in Chinese students studying in the US has received some policy response from the Americans, with the US government expressing a desire to bridge the gap between the number of Chinese studying in the US and the number of Americans studying in China. While there appears to be state support promoting Chinese students to study in the US, some reports have questioned whether they are getting sufficient returns on a US education. The increase in numbers likely stems from two factors: one, from rising incomes in China and two, from state support for foreign study. These numbers started going up before the global financial crisis and stayed high through out it.

Indian students in the US, while much smaller in number, arguably add greater value to the US economy per person. For one, Indians in the US are more likely to be studying at the masters or PhD level instead of an undergraduate education. This implies a higher threshold for selection, more number of years spent in the country, and a higher productivity and skill of the labour that comes after education.

Two, the number of F-1 student visas to Indians dipped slightly in FY2009, along with the overall number of F-1 visas issued. This was around the time of the financial crisis, a period when scholarships and university funding of masters and doctoral programmes started reducing in number, as well as the availability of jobs in the US started becoming uncertain. This implies a sensitivity of Indian students in the US to the American job market. This is in contrast to the increasing Chinese students who are likely to head back home immediately after education, at their rapid rate of increase.

Three, it is also likely that a higher proportion of Indian students are funded by US universities for their study, with the rupee-dollar exchange rate being unaffordable for most Indians. This could explain much of the drop in student visas between FY2008 and now.

US F1 Visas India China

The last decade in the US has seen a sharp rise in the number of Chinese students, a plateauing of South Korean and Indian students and a fall in the number Japanese students. The reasons for these changes can be multiple. Certain student cohorts are seen as revenue sources for US universities, certain others as high-skilled labour in research, tech and other sectors. The Indian student cohort, though small, punches above its weight. Binning luddite notions of ‘brain drains’, both US and India need to think about how they can enable the student cohort to do even better.

Immigration does not feature high on the agenda for strategic dialogue between India and the US, and student immigration even less so. It’s about time that people in Washington DC and New Delhi paid a little more attention to this as a policy issue much as it remains a social and cultural one.

Comments { 20 }