Decoded | Nirmala Sitharaman's visit in Washington: Bid to boost India-US trade ties?

Crippling sanctions imposed on Russia by the US and other western nations are already showing an impact on the global economy, with rising energy & commodity prices and supply chains hit.

While the West has signalled a clear decoupling from Moscow, should India brace for impact? Finance Minister Nirmala Sitharaman's visit to the United States this week allayed some fears.

The trip comes close on the heels of the US-India 2+2 dialogue held earlier this month, and is well-timed to steer the bilateral trade relationship between the two nations, in a favourable direction.

Nirmala Sitharaman's agenda is packed. A meeting with the IMF Managing Director; followed by bilateral meetings with Indonesia, South Korea, Sri Lanka; a meeting with World Bank president David Malpass; meetings with US CEOs from the semiconductor, energy and other priority sectors; an address at the Atlantic Council; and, an interaction with the faculty and students of Stanford University.

Things seem to be going well. International Monetary Fund Managing Director Kristalina Georgieva has lauded India for its well-targeted policy mix to keep the economy resilient. She also praised India’s commitment to support economic growth through capital expenditure.

Although there was some discomfort over India buying discounted oil from Russia to meet its energy needs, the US has not set a "red line".

After the US and China, India is the world's third-largest consumer of oil, over 80% of which is imported. In 2021, India bought about 12 million barrels of Urals oil from Russia, around 2% of its total imports.

However, since February, India's oil imports from the US have gone up significantly, which is good news for India-US ties. According to officials, India's oil imports from the US are expected to rise by 11% amid criticism over Russia.

The partnership between the world’s two largest democracies and free-market societies has shown impressive gains. The United States is India's largest trading partner with bilateral trade between the two nations at $113.6bn in 2019-20. India's exports to the US stood at $51.62 bn in 2020-21, while India's imports from the US were about $28.9 bn in 2020-21.

China’s assertiveness is another major reason why both India and the United States seem to be aligned in their economic and trade strategies. Despite divergences on Russia, the US and India understand that ceding the Indo-Pacific region to China may have irreversible consequences.

Therefore, the first step in cementing those ties was to restart the Trade Policy Forum or TPF after a gap of 4 years. US trade representative Katherine Tai met Commerce Minister Piyush Goyal in Delhi last November, to discuss “the full range” of issues affecting their trade relationship.

The Biden administration is also shaping up the Indo-Pacific Economic Framework or IPEF, to economically re-engage with the region, with India taking the lead.

The IPEF will set the US agenda, with a focus on 4 pillars: fair and resilient trade; infrastructure, clean energy, and decarbonization; supply chain resiliency; and tax and anti-corruption. Finance Minister Nirmala Sitharaman has called it ‘a fantastic thought’ which will further bolster India-US ties.

“It is a very innovative way of engaging with countries in that region--Vietnam, Philippines, Malaysia, Thailand. PM Modi is looking at it and we will take a considered view. It will bring new traction to the relationship", said the Finance Minister.

Washington understands that India is an important trading partner, so expanding the mandate of the Quad may be another way to shape the regional economic order to counter China’s influence.

Australia, India, Japan, and the United States, represent four of the largest and strongest economies that should be involved in setting the rules of the game, via a trade working group.

Experts have also argued that a bilateral free trade agreement could be the next frontier in the US-India relationship. Simply because it is not sustainable for the world's two largest economies to not have a trade architecture in place between them, and be outside of the Trans-Pacific Partnership.

Washington & New Delhi are now looking to take bold strides, to show that democracies can deliver. $500bn in bilateral trade between the two countries, seems like an achievable target. This will position the US-India partnership as a force to reckon with, and provide impetus for global growth.