India-US Bilateral Trade Relations
Indian Economy
- PYQs8
- Articles1
Background
India-US relations are a cornerstone of India's foreign policy and economic strategy. Trade is a significant component, impacting domestic industries, exports, and geopolitical alignment. UPSC frequently asks about major bilateral relations and their economic and strategic dimensions.
India-US bilateral trade relations encompass the economic interactions, including goods, services, investment, and technology transfer, between the two countries. These relations are often governed by various agreements and discussions aimed at facilitating trade, resolving disputes, and fostering mutual economic growth.
Facts & tables
- Major Trading Partner
- The United States is one of India's largest trading partners, with significant trade in goods and services.
- Key Issues
- Trade discussions frequently involve issues such as tariffs, market access, and intellectual property rights.
- Agreement Objectives
- Bilateral trade agreements aim to reduce trade barriers and promote a more balanced and mutually beneficial economic partnership.
- Strategic Context
- The strategic partnership between India and the US extends beyond trade to include defense, technology, and geopolitical cooperation.
| Type | Reference |
|---|---|
| Conceptual area | International Relations |
| Conceptual area | Indian Economy |
| Body | Role |
|---|---|
| Ministry of Commerce and Industry (India) | Negotiates trade agreements |
| Office of the United States Trade Representative (USTR) | Negotiates trade agreements |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Factual recall
- US is a major trading partner for India.
- Trade deals aim to reduce tariffs and market access barriers.
- Tariffs are a frequent point of contention.
- Bilateral trade underpins broader strategic partnership.
- Ongoing negotiations for mutually beneficial agreements.
| Year | Framing tags |
|---|---|
| 2022 | Multi-statement analysis, Conceptual understanding |
| 2020 | Multi-statement analysis, Factual recall |
| 2020 | Conceptual understanding, Definition-based questions |
| 2020 | Multi-statement analysis, Conceptual understanding |
| 2018 | Factual recall, Cause and effect relationships |
| 2017 | Multi-statement analysis, Factual recall |
| 2017 | Factual recall, Terminology-based question |
| 2016 | Multi-statement analysis, Conceptual understanding |
Timeline
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International Relations
Conceptual area
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Indian Economy
Conceptual area
-
Prelims 2016
Multi-statement analysis, Conceptual understanding
-
Prelims 2017
Multi-statement analysis, Factual recall
-
Prelims 2017
Factual recall, Terminology-based question
-
Prelims 2018
Factual recall, Cause and effect relationships
-
Prelims 2020
Multi-statement analysis, Factual recall
-
Prelims 2020
Conceptual understanding, Definition-based questions
-
Prelims 2020
Multi-statement analysis, Conceptual understanding
-
Prelims 2022
Multi-statement analysis, Conceptual understanding
-
PM Modi good friend, India and U.S. will get to trade deal: Trump
Focuses on the economic ties, trade agreements, and points of contention (like tariffs) between India and the United States, crucial for understanding India's external sector and foreign policy.
See also
Past papers
2016–2022 · 8 questions
In the news
PM Modi good friend, India and U.S. will get to trade deal: Trump
Focuses on the economic ties, trade agreements, and points of contention (like tariffs) between India and the United States, crucial for understanding India's external sector and foreign policy.
Try these PYQs
Consider the following statements:
1. The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2. “Textile and textile articles” constitute an important item of trade between India and Bangladesh.
3. In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
Statement 1 is not correct. Bilateral trade between India and Sri Lanka has increased by around 9 times between 2000-01 and 2018-19. Total trade between the two countries was US$ 6.2 billion in 2018-19, out of which India's exports to Sri Lanka were US$ 4.7 billion and imports were US$ 1.5 billion. Although India has always had a trade surplus with Sri Lanka, the gap has widened since 2008-09. In 2012-13 and 2016-17, the trade slumped, thus disturbing the steady increase in the graph. Statement 2 is correct. According to the World Bank, India exports $2.25 billion worth of textile and clothing products to Bangladesh. In turn, it imports $336 million worth of textile and clothing products from Dhaka. Statement 3 is not correct. Bangladesh is India's biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India's exports to Bangladesh in FY 2018-19 stood at $9.21 billion and imports during the same period were at $1.04 billion.
Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and
The Broad-based Trade and Investment Agreement (BTIA) is negotiated between India and the European Union (EU).
Consider the following statements:
1. India has ratified the Trade Facilitation Agreement (TFA) of WTO.
2. TFA is a part of WTO’s Bali Ministerial Package of 2013.
3. TFA came into force in January 2016.
Which of the statements given above is/are correct?
The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. Statement 1 is correct. India has ratified the Trade Facilitation Agreement (TFA) of the WTO. This signifies India's official acceptance and implementation of the agreement's provisions. Statement 2 is correct. The TFA is indeed a part of the WTO's Bali Ministerial Package of 2013. This package refers to a collection of agreements reached during the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia. The TFA was a landmark achievement within this package. Statement 3 is incorrect. The Trade Facilitation Agreement (TFA) came into force in February 2017, not January 2016. It required ratification by two-thirds of WTO members before taking effect.
With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?
1. Quantitative restrictions on imports by foreign investors are prohibited.
2. They apply to investment measures related to trade in both goods and services.
3. They are not concerned with the regulation of foreign investments.
Select the correct answer using the code given below:
Statement 1 is correct: The Trade-Related Investment Measures (TRIMS) agreement under the World Trade Organization (WTO) prohibits quantitative restrictions on imports by foreign investors. This means that countries cannot impose conditions like mandatory local sourcing or trade-balancing requirements that distort free trade. Statement 2 is incorrect: TRIMS only applies to trade in goods, not services. The regulation of trade in services falls under the General Agreement on Trade in Services (GATS), not TRIMS. Statement 3 is correct: TRIMS is not directly concerned with the regulation of foreign investments. Instead, it focuses on investment measures that affect trade in goods, ensuring that they do not create barriers to international trade. Hence, option C is the correct answer.
With reference to the ‘Trans-Pacific Partnership’, consider the following statements:
1. It is an agreement among all the Pacific Rim countries except China and Russia.
2. It is a strategic alliance for the purpose of maritime security only.
Which of the statements given above is/are correct?
Statement 1 is Incorrect: While China and Russia were not part of the TPP negotiations, it wasn't solely focused on Pacific Rim countries. Other economies like Vietnam and Singapore were part of the TPP despite not exactly being on the Pacific Rim. Statement 2 is Incorrect: The TPP was a proposed trade agreement, not a strategic alliance for maritime security. It aimed to reduce trade barriers and promote economic integration among member countries. The TPP negotiations were concluded in 2015, but the agreement was never ratified by all the signatories. The United States withdrew from the TPP in 2017, effectively ending the initiative in its original form. However, some member countries pursued alternative trade agreements based on the TPP framework. Hence, option D is the correct answer.
Show 3 more PYQs
Consider the following statements:
1. Tight monetary policy of US Federal Reserve could lead to capital flight.
2. Capital flight may increase cost of firms with existing External Commercial Borrowings (ECBs)
3. Devaluation of domestic currency decreases the currency risk associated with ECBs
Which of the statements given above are correct?
Tight monetary policy is an action taken by a central bank, such as the Federal Reserve, to curb overheated economic growth. Central banks employ tight monetary policy when an economy is experiencing rapid acceleration or when inflation, which pertains to overall prices, is escalating too swiftly. Statement 1 is correct. A tight monetary policy by the US Federal Reserve means higher interest rates in the US. This attracts global investors to shift their capital towards US assets for better returns. As a result, there can be capital flight from emerging markets like India to the US. Statement 2 is correct. When capital flows out, the domestic currency tends to depreciate, and global interest rates rise. Firms that have borrowed in foreign currencies through External Commercial Borrowings (ECBs) will now face higher repayment costs in rupee terms. Thus, their cost of servicing these loans increases, raising their overall financial burden. Statement 3 is incorrect. Devaluation of the domestic currency actually increases the currency risk associated with ECBs. Since these loans are denominated in foreign currency (like USD), a weaker rupee means firms have to pay more in rupees to repay the same amount of foreign debt. Therefore, devaluation heightens, not reduces, currency risk. NOTE: The given question was dropped by UPSC from the Official Answer Key.
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
Option A is incorrect. Foreign Direct Investment (FDI) typically involves investment in unlisted companies or companies that involve a direct ownership stake, not just investments through capital instruments in listed companies. Option B is correct. FDI is considered a non-debt creating capital flow because it involves equity investments that do not require repayment, unlike loans or debt instruments. This type of investment brings in long-term capital and management expertise, which helps in the development of industries in the host country. Option C is incorrect. FDI does not involve debt-servicing. Unlike loans or bonds, FDI involves ownership stakes, and thus, there is no obligation to pay interest or principal repayments. Option D is incorrect. The investment in Government securities by foreign institutional investors (FIIs) is considered foreign portfolio investment (FPI), not FDI. FDI focuses on acquiring a substantial ownership stake in a company, whereas FPI involves short-term investments in financial assets. Hence, option B is the correct answer.
India enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 in order to comply with the obligations to
The World Trade Organization (WTO) has an agreement called the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS requires member countries to protect Geographical Indications (GIs). GIs identify a product as originating from a specific geographical location where its qualities or reputation are essentially due to that origin. India enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 to comply with its obligations under the TRIPS agreement of the WTO.