At the heart of Indo-US ties: Economics & Strategy

  • As Indian PM heads to the US for an official state visit, the bipartisan consensus in Washington on fostering the bilateral relationship is exemplified by the invitation to address a joint meeting of Congress for a second time.
  • It is an honour that has been accorded earlier only to a few leaders including Winston Churchill, Nelson Mandela, and Israel’s Prime Ministers Binyamin Netanyahu and Yitzhak Rabin.
  • At the heart of the Indo-US strategic partnership is deepening economic engagement and a resolve on both sides to elevate the bilateral relationship to a “global strategic partnership”.

India-USA economic engagement

  • There is significant rise in India-USA relations.
  • PM’s visit comes at a time when the value of trade between the two countries has touched a record $191 billion, making the US India’s largest trading partner.
  • For India, the favourable balance of trade position with the US is comforting, given that it has an adverse balance of trade equation with the majority of its other major trading partners.
  • For the US, India is the ninth largest trading partner.

Mutual investments

  • American companies have invested around $60 billion in India in sectors ranging from manufacturing to telecommunications and consumer goods to aerospace.
  • And Indian companies have put in more than $40 billion in sectors such as IT, pharmaceuticals, and green energy

Strategic engagement of India-USA

  • Aim: To counter China’s growing influence in the Indian Ocean rim, and as a forum for redoubling focus on the Indo-Pacific region.
  • Post-pandemic consensus: To diversify and deepen supply chains with trusted countries, while reducing strategic dependencies.
  • Quadrilateral Security Dialogue: The Quad began as a broad partnership after the 2004 Indian Ocean tsunami, but gained strategic heft after the four-country grouping, which has Australia and Japan alongside
  • I2U2: A grouping of India, Israel, the US and the United Arab Emirates which is focused on joint investments and new initiatives in water, energy, transportation, space, health, and food security.
  • US-India initiative on Critical and Emerging Technologies: Launched by National Security Advisor Ajit Doval and his US counterpart Jake Sullivan at the beginning of this year.

Strengthening the semiconductor supply chain

  • During the US Secretary of Commerce’s visit in March, the two countries established a partnership to make the semiconductor supply chain more resilient through private sector cooperation.
  • Benefits for India
    • India is striving for a more central role in the global electronics supply chain especially the possibility of potential convergence among the chip manufacturing incentive scheme launched by India and other governments around the world.
    • There is a commitment to mainstream India’s $10 billion incentives for component manufacturing projects from established foreign chip firms and industry leaders, as opposed to just marginal players that have shown interest in India’s scheme so far.
    • There is also the possibility of India benefiting from a further realignment of the regional collaborative effort being fostered by the US, which aims to diversify the sourcing supply base for semiconductor chips and avoid duplication of effort.
  • The US is already pursuing the ‘Chip 4’ alliance initiative with three other top semiconductor makers, Taiwan, Japan, and South Korea.
  • In 2021, India, Japan, and Australia had announced plans to establish a semiconductor supply chain initiative “to secure access to semiconductors and their components

India-USA Defence cooperation

  • Cooperation in areas such as armoured vehicles, ammunition, and air combat could include a deal for India, the world’s largest arms importer, to manufacture under licence GE’s F414 turbofan jet engine to power the indigenous Tejas Mk2 light combat aircraft that is under development.

Areas of concern

  • US’ export controls on India: These were instituted after the 1998 nuclear test, which inhibits the free transfer of technology.
    • If the GE deal goes through, it will require clearance by Congress.
  • Trade issues: Visa delays and the revoking of India’s trade benefits under the Generalised System of Preferences (GSP) programme in 2019.
  • India’s allegedly overly protectionist trade policy: These issues lie especially with regard to entry barriers for foreign investment and unsteady legal rules.
    • India has been raising tariffs over the last few years, reversing an earlier policy of lowering tariffs that endured for decades.
  • India’s reluctance to join the US-led Indo-Pacific Economic Framework (IPEF): From Washington’s perspective, there is no political appetite for a full-scale free trade agreement (FTA) with India in Congress at this moment, and it sees the IPEF as a more practical substitute for bilateral deals. (The Trade Policy Forum Working Group on Resilient Trade launched in January 2023 is seen as a primer for an FTA.)
    • India has signed up for three pillars of the IPEF committed to building more resilient supply chains, tapping clean energy opportunities, and combating corruption; but has opted out of the fourth pillar (trade) citing reservations about the commitments required on environment, labour, digital trade, and public procurement.
  • India not finding an entry into the Minerals Security Partnership (MSP): A US-led partnership to secure supply chains of critical minerals that is aimed at reducing dependency on China. The partnership has now been expanded to include a new member, Italy (along with the 11 founding countries and the European Union).


  • The relationship between India and the US are significant for shaping world order in the 21st century.
  • Therefore, both the nations need to address the areas of concern and strengthen its relation for the political, economics and social development of both nations and its people.

Prelims Bits

Quadrilateral Security Dialogue (Quad)

  • It is the informal strategic dialogue between India, USA, Japan and Australia with a shared objective to ensure and support a “free, open and prosperous” Indo-Pacific region.
  • The idea of Quad was first mooted by Japanese Prime Minister Shinzo Abe in 2007. However, the idea couldn’t move ahead with Australia pulling out of it, apparently due to Chinese pressure.
  • December 2012 : The then Japanese PM Shinzo Abe again floated the concept of Asia’s “Democratic Security Diamond” involving Australia, India, Japan and the US to safeguard the maritime commons from the Indian Ocean to the western Pacific.
  • November 2017: India, the US, Australia and Japan gave shape to the long-pending “Quad” Coalition to develop a new strategy to keep the critical sea routes in the Indo-Pacific free of any influence (especially China).


  • A US-led initiative that aims to strengthen economic partnership among participating countries to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.
  • Launched in 2021 with a dozen initial partners who together represent 40% of the world GDP.
  • Not a Free Trade Agreement (FTA) but allows members to negotiate the parts they want to.
  • The negotiations are along four main “pillars”.
    • Supply-chain resilience
    • Clean energy, decarbonisation & infrastructure
    • Taxation & anti-corruption
    • Fair & resilient trade.
  • Currently, India and 13 countries located in the Pacific Ocean are its members:
    • Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, United States, and Vietnam.


  • A new grouping of India, Israel, USA and UAE.
  • ‘I2’ stands for India and Israel, whereas ‘U2’ stands for USA and the UAE.
  • It will not only revitalize and re-energize the system of alliances and partnerships around the world, but also stitch together partnerships that did not exist previously or were not utilized to their full extent.