Trade, Investment, and Economic Growth

The John Deere tractor factory in Madhya Pradesh. Photograph courtesy U.S. Consulate General Mumbai

Trade and investment have long been at the heart of the U.S.-India relationship. For over 200 years, Americans and Indians have displayed an exceptional entrepreneurial spirit in traversing the Indo-Pacific region to exchange goods and services, collaborate on joint enterprises, and spur innovation. They have been drawn by mutual goodwill, the size of our respective markets, unique products and comparative advantages, and the creativity and productivity of our peoples.

This commerce has grown over time as travel has become easier and technology has improved. Efforts by our governments have played an important role supporting these exchanges. For more than 200 years, U.S.-India trade has had a wide and lasting impact on our economies and societies. Our age-old connections are visible in historical buildings that bear witness to the many years of U.S.-India trade, in the goods and services we consume in our daily lives, and in the very people who make up our nations today.

Economic cooperation has raised living standards in the United States and India, increased access to higher-quality and lower-priced goods and services, and delivered wider benefits to the world. U.S.-India commerce has inspired new firms and products, strengthened companies operating in both countries with information and services flowing across the Indo-Pacific, and propelled our two countries to become technological leaders in the 21st century.

A Long History of Partnership on Trade, Investment, and Economic Growth

Trade drove much of the early contact between Americans and Indians, starting with a merchant ship named the United States, which left Philadelphia packed with American goods and arrived in Puducherry in December 1784. The ship and its American crew departed in February 1785, having filled its hold with Indian spices, teas, and shawls for sale in the United States.

Trade was likely what motivated President George Washington to nominate Benjamin Joy in 1792 to be the first U.S. Consul to India. As bilateral commerce became more regular in the 1800s, local infrastructure followed. Indian merchants established warehouses and shops to sell their goods in places such as New York. American merchants did the same in India. One such building still stands today – an icehouse built in 1842 by American businessman Frederic Tudor along the beach in Chennai to store the ice he imported from New England for sale in India. Swami Vivekananda visited the building in 1897, four years after his historic trip to the United States when he introduced the Indian philosophies of Vedanta and yoga, and that building now houses an exhibition on his life.

By the end of the 1800s, a growing number of Indians were coming to the United States to seek economic opportunity. Many were farmers from Punjab, who settled in Central California, putting their skills and knowledge to use to help the region become a leading agricultural producer.

Commerce continued to grow in the first half of the 20th century, through contributions from individual entrepreneurs and major corporations alike. U.S.-based General Electric (GE) commissioned a hydroelectric power project in Karnataka in 1902, helping generate economic growth in South India for decades to come. By 1925, the Ford Motor Company was bringing over 100 Indian “service executives” a year for management courses in Detroit, before assigning them overseas. Most of the 100 Indians who received degrees at the Massachusetts Institute of Technology between 1882 and 1947 returned to India to use their engineering skills in Indian enterprises.

Indian immigrants also contributed to the U.S. economy while often maintaining ties back home. In the 1920s, Sakharam Ganesh Pandit became a successful attorney in California, arguing cases before the Supreme Court. In the 1930s, J.J. Singh became a prosperous importer of fabrics from India to New York and set up the U.S.-based Indian Chamber of Commerce. With the subsequent expansion of immigration to the United States, Indian immigrants came to play increasingly significant roles in a number of U.S. industries, including medicine, engineering, hospitality, and technology.

Trade and investment expanded further after India gained independence in 1947, and then accelerated after India opened its economy in the 1990s. Examples are many. The medical device company Medtronic began operations in India in 1979, and by 2020 had more than 1,100 employees at research and development facilities in the country. Whirlpool entered India through a joint venture in the late 1980s, and after years of steady expansion became a market leader in home appliances. Today, Whirlpool produces advanced machines at facilities in Faridabad, Puducherry, and Pune. Farm equipment-maker John Deere similarly has increased its presence in India after entering the market in 1998.

The U.S. government has long supported India’s economic growth. The role of the United States as one of India’s leading development partners traces its roots to an initiative negotiated by U.S. Secretary of State Dean Acheson and Prime Minister Jawaharlal Nehru in the early 1950s. Under this program, the United States provided funds for wheat and support for economic development projects in India. In the following years, cooperation expanded to include education, energy, health, infrastructure, and other critical sectors. Today, the United States and India are looking beyond our borders and working together to promote development in Africa and Asia.

Recent Progress in U.S.-India Economic Relations

Economic ties expanded significantly after India began opening its markets in the early 1990s. In the last few years, bilateral trade and investment have broadened and deepened. This has occurred across both of our large economies and industries. Small-, medium-, and large-sized firms have all played important roles, as have countless individuals who took the lead in developing new products or services, made investment decisions, or just forged connections across the Indo-Pacific.

In the last two decades, bilateral trade in goods and services has surged from $20.7 billion in 2001 to over $146.1 billion in 2019. This makes the United States the largest trading partner of India, and India the ninth largest trading partner of the United States.

In 2019, two-way trade in goods amounted to $92 billion, while trade in services was worth $54.1 billion. In fact, approximately 16 percent of India’s total exports now head to the United States. India’s top exports to the United States have been precious metals and stones, pharmaceuticals, machinery, mineral fuels, and organic chemicals. The most valuable exports from the United States to India have similarly included precious metals and stones, mineral fuels, and organic chemicals, as well as aircraft and aircraft parts and machinery such as boilers and reactors.

Exports of goods and services from the United States have grown, providing advanced technology, wider consumer choice, and intermediate parts for production lines of Indian companies. These have helped bring India into global supply chains and boost the competitiveness of Indian firms.

A growth of remittances from Indians in the United States, totaling over $11.7 billion in 2017, has also strengthened India’s economy. Even private U.S. citizens have boosted jobs and growth in India, as they have often been one of the largest groups of foreign tourists. In 2019, approximately 1.5 million Americans visited India.

Growing U.S. Investments in India

In recent years, many U.S. firms have made significant investments or expanded existing operations in India. U.S. companies have become India’s largest source of foreign direct investment. According to the U.S. Bureau of Economic Analysis, cumulative foreign direct investment from the United States reached nearly $46 billion in 2019, though the actual amount is significantly higher, as this figure reflects only investments coming directly from the United States and does not capture all forms of U.S. investments.

U.S. companies have made some of the biggest investments in India’s history, such as Walmart’s $16 billion acquisition of Flipkart in 2018 and the more than $16 billion of investments from various U.S. companies into Reliance Jio in 2020. Amazon’s interest in India continues to grow steadily, with 2016 e-commerce investments totaling $5.5 billion and an additional $1 billion announced in January 2020. Amazon Web Services most recently announced a significant investment in the company’s second data center in India. Mastercard is committed to building a vibrant digital payment ecosystem in India and has invested heavily – $1 billion between 2014-2019, and an additional $1 billion in the near future – toward expanding its capabilities and fostering innovation in India. In 2020, Mastercard committed $33 million to support small- and medium-sized enterprises. John Deere has steadily increased its investments in India, and now operates eight manufacturing and service facilities employing over 4,000 people. In 2020, Medtronic announced a $160 million expansion of its engineering and innovation center in Hyderabad – now its largest research and development center outside of the United States – with employees focused on modern procedures such as robot-assisted surgery. GE has greatly expanded its operations during its century of presence in India, including working on India’s first nuclear power station, a joint U.S.-India gas turbine project, and the first public-private partnership in India’s transportation sector. The latter – a $2.5 billion project – is providing 1,000 fuel-efficient diesel locomotives to Indian Railways.

Numerous other U.S. companies are deeply embedded in the Indian economy, working with partners and suppliers across the country. Power generation company Cummins runs extensive operations in India, employing over 10,000 personnel in 21 facilities, many of which use green production techniques to minimize environmental impact. Boeing has steadily increased its connections with and operations in India over the last 75 years, and today works with over 200 Indian suppliers. The company has quadrupled sourcing from India in the last five years, including structural elements for the 787 Dreamliner aircraft. Boeing employs over 3,500 people directly in India, with more than 7,000 jobs supported through its Indian partners. Boeing also conducts research in collaboration with Indian universities, laboratories, and the Indian Ministry of Science and Technology.

Growing Indian Investments in the United States

An expanding number of Indian companies have similarly found the United States to be a welcoming destination for trade and investment. According to U.S. Department of Commerce SelectUSA data, by 2019 Indian investment in the United States totaled $16.7 billion, a 20 percent increase over 2018, and supported 67,000 jobs.

Tata Steel has a major office in Chicago and supports thousands of U.S. jobs in manufacturing steel products for dozens of industries. Aditya Birla Group metals company Hindalco has invested over $8.8 billion to purchase U.S.-based aluminum producers Novelis and Aleris. Mahindra is active in heavy industry, operating five U.S. assembly plants that make tractors and other machinery used by farmers across the United States. Dr. Reddy’s Laboratories produces affordable generic drugs with state-of-the-art research and manufacturing facilities in Louisiana and New York. Bharat Forge announced a $170 million investment in an aluminum facility in North Carolina in 2019. Numerous other Indian companies, including Daxter Tools and Polyhose, have recently expanded operations in the United States.

U.S. imports of goods and services from India have also grown in recent years, reaching $87.4 billion in 2019. These include industrial supply and consumer goods, and services such as transportation and information and communications technology. In addition, the number of Indian tourists and students has risen in recent years, contributing $16.4 billion to the U.S. economy in 2019 alone.

Government Engagement Promotes Economic Growth

The U.S. and Indian governments have expanded structured dialogues and high-level consultations to promote trade and investment. Our leaders have actively encouraged and supported the recent growth in trade. U.S. Presidents Barack Obama and Donald J. Trump both met with senior members of the business community during their respective visits to India, and Prime Minister Narendra Modi has met regularly with business leaders across the United States during his visits.

The U.S.-India Commercial Dialogue, led by the U.S. Secretary of Commerce and the Indian Minister of Commerce and Industry, was established in 2000 to increase trade and investment between our two nations. The expanded U.S.-India Strategic and Commercial Dialogue was held in 2015 and 2016, with the participation of the U.S. Secretary of State and the Indian Minister of External Affairs. The stand-alone Commercial Dialogue was held again in 2017 and 2019.

Other senior officials have engaged in regular dialogues on U.S.-India trade and investment. The U.S. Secretary of the Treasury and the Indian Minister of Finance chaired the U.S.-India Economic and Financial Partnership in 2015, 2016, and 2019. The U.S. Trade Representative and the Indian Minister of Commerce and Industry led meetings of the U.S.-India Trade Policy Forum in 2015, 2016, and 2017. In addition, the U.S and Indian governments convened meetings of the U.S.-India CEO Forum in 2015, 2016, 2019, and 2020 to exchange views with industry leaders on ways to improve economic opportunities in each country. This Forum has generated recommendations to the U.S. and Indian governments on ways to increase trade and investment, including with regard to the Indian insolvency and bankruptcy legislation that was ultimately enacted in 2016.

Our two governments, including the respective ambassadors in New Delhi and Washington, D.C., have also convened industry-specific meetings and led trade delegations. In August 2018, U.S. Ambassador to India Kenneth I. Juster and Indian Minister for Railways and Coal Piyush Goyal convened a Railways Roundtable with 15 U.S. companies. This event enabled multiple parties to discuss and resolve market access issues, and helped U.S. firms better understand and navigate the requirements for bidding on Indian railway contracts. In May 2019, U.S. Secretary of Commerce Wilbur Ross brought a trade delegation of more than 130 small- and medium-sized enterprises from 32 U.S. states to India to explore commercial partnerships. After an initial conference in New Delhi, the companies’ representatives traveled to Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, and Mumbai for one-on-one meetings with Indian business leaders and government officials.

U.S.-India dialogues on specific sectors have also helped advance government policy and commercial ties. In recent years, the U.S.-India Information and Communications Technology Working Group has agreed on shared principles to support cooperation on high-speed 5G networks, providing a framework for security and growth. In addition, the Group has brought together a range of government and technical experts to draw on our shared interests and democratic principles to provide a common vision for cyberspace.

U.S. Government Support for Indian Entrepreneurs and Regional Trade

The U.S. government has supported the development of small- and medium-sized companies in India, which are considered engines for growth, job creation, and innovation. In 2017, the United States and India co-hosted the Global Entrepreneurship Summit (GES) in Hyderabad. This event connected entrepreneurs with investors and international counterparts, with a particular focus on promoting access to capital by women entrepreneurs. The idea for a Women Entrepreneurship Platform (WEP), where women could exchange best practices on growing their companies, originated at this event. The WEP was formally launched on International Women’s Day, March 8, 2018, in partnership with the Indian government think tank NITI Aayog.

To further advance the goals of the GES, the U.S. Embassy subsequently awarded grants to foster digital skills among entrepreneurs, organized talks by experts on gender issues, and arranged mentorship and networking opportunities for women entrepreneurs. Indian women leaders also visited the United States as part of the U.S. Embassy’s International Visitors Leadership Program.

The U.S. Embassy launched the Nexus Startup Hub at the American Center in New Delhi in 2017, which has helped Indian startups raise millions of dollars of investment capital, expand client lists, and create partnerships with domestic and international companies. The four U.S. Consulates have also encouraged entrepreneurship, and women entrepreneurs in particular, with programs across the country.

In the last few years, the U.S. Agency for International Development (USAID) has helped implement in India the White House-led Women’s Global Development and Prosperity initiative, designed to advance women’s economic empowerment, including supporting women in the workforce as entrepreneurs and leaders. For example, USAID has worked with PepsiCo to provide professional support to female potato farmers in West Bengal who are part of the Lay’s potato chips supply chain. USAID has also worked with Tata Power to expand leadership opportunities for women in the energy sector.

The U.S. International Development Finance Corporation (DFC) has supported several large projects, including guaranteeing a $5 million initiative to help develop a women-owned agricultural company in Chennai and introduce advanced technology to improve farming yields. The DFC has also supported the 2X Women’s Initiative, which spurred private sector funding for projects such as providing affordable home mortgages to 1,200 women in India.

The U.S. government has supported other projects to help connect India with its neighbors and boost regional trade. Since 2017, the United States has sponsored three Passage to Prosperity trade shows with the governments of India and Afghanistan. These have resulted in confirmed deals worth an average of over $30 million each year between Afghan and Indian companies, primarily in agricultural goods.

The Role of Sub-National Diplomacy in Powering Growth

Cities and states in both of our countries have helped drive the recent increase in trade and investment. A growing number of U.S. governors, mayors, and members of state assemblies have visited India to promote business ties. In fact, throughout 2019, the governors of the states of Arkansas, Colorado, Indiana, Kentucky, and New Jersey visited India. Several Indian chief ministers have visited the United States, and others have set up a point person to deal with U.S. investment in their states.

Trade and Investment Offer a Future of Growth and Increased Prosperity

U.S.-India trade and investment have a long history of supporting growth in both countries and bringing us together. These ties have further intertwined our economies, our societies, and our families. Additional economic reforms and greater market access hold the potential for much more growth. As we look to the future, we see the possibility of greater economic integration and development across the Indo-Pacific.

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