Growth is not limited to companies in IT or manufacturing sectors, but also in tourism, CSR and R&D.
The India-US economic engagement is a story of secular growth and mutual job creation. Growing at 10% on a year-to-year basis, bilateral trade reached $160 billion in 2019. Two-way investment between India and the US reached $60 billion in 2018, with the creation of jobs by American companies in India and by Indian companies in the US—about 100 Indian companies have invested almost $18 billion in the US and created over 113,000 jobs. Other areas of collaborative contribution include R&D as well as CSR.
Both domestic and foreign investments have risen, there has been increased spending on creating infrastructure, and a steady rise in the demand for consumer durables along with a surge in air travel. While there has been a recent slowdown of India’s economic growth, the country offers investment opportunities for American companies to grow in India. In fact, India is a place where American companies can turn to as they divert supply chains from China.
For India, the US has been a large and strategic market. American businesses have taken note of India’s rise in Ease of Doing Business ranking and structural reforms like GST. The converse is equally compelling. Of all foreign companies operating in India, US-based companies are the majority. India can make a difference to most companies’ bottom lines, with its large reserves of talented human resources.
Growth is not limited to companies in IT or manufacturing sectors; several US-based companies have significant sales and field operations in India. More opportunities for job creation are on the way; defence and tourism are on top of the list. To boost India’s defence sector, India has finalised two deals worth $3.5 billion with the US, setting the stage for more bilateral progress. The Make in India initiative provides impetus to greater defence cooperation between the two countries that can create defence manufacturing jobs—where the US can benefit from India’s labour and cheaper components, and India can gain from American know-how and technical expertise.
The US-India bilateral relationship is also strengthened by tourism. With over 4 million people, Indians form the second largest group in the US, after China, and their contribution to tourism to India is significant. Travel and tourism contributes substantially to India’s GDP; in 2017, it was $234 billion, and has been projected to reach $492.2 billion in 2028. The number of jobs created by the Indian tourism industry in the last four years has been 14.62 million, which is expected to double by 2027. Also, India climbed to the 10th position in arrivals in the US, as travel between the two countries went up 10.3% between 2018 and 2019. In 2018, 1.4 million Indians visited the US, and it is expected 1.9 million Indians will visit the US in 2023. Accordingly, direct air connectivity between the two has increased. Several US-based airlines have started offering non-stop daily flights to different destinations in India from the US.
Technology start-ups in India play a significant role in the growth of the tourism sector. In addition to bringing in innovation in services offered by the tourism industry, start-ups are contributing in large measure towards personalising experiences, offering opportunities of technological partnership to US firms. Hospitality, too, is evolving and presents opportunities for both the countries.
The past decade has fared well for trade and investment between India and the US, and this pace will only increase. The potential of the Indo-US relationship is enormous both for commercial opportunities and strategic concerns. A forward-looking trade agreement between the countries will facilitate further job creation in both the countries.
(A version of this article appeared in The Financial Express on February 25, 2020)