U.S.-India Relations: Democratic Partners of Economic Opportunity

Over the past two decades, both Democratic and Republican administrations, boosted by bipartisan support in Congress, have recognized the importance of building strong ties with India. The world’s most populous democracy occupies a pivotal place in Asia, sandwiched between a rising China and the turmoil of Pakistan and Afghanistan. U.S. hopes for fostering peace and prosperity in Asia rest in no small measure on deepening the U.S.-India relationship.

For the most part, however, economic ties between the two countries have not kept pace with a growing strategic convergence. With an annual output of $2 trillion, India is the ninth largest economy in the world. In purchasing power parity terms it is even larger—a $7.4 trillion economy, or the world’s third-largest. Yet, in 2015, India was only the U.S.’s tenth largest trading partner in goods, ranked below smaller economies such as Taiwan and South Korea. Trade in goods amounted to $66.3 billion. Trade in goods and services combined came to $107 billion.

The U.S. has an interest in India emerging as a prosperous, market-oriented democracy and a strong American trading partner fully integrated into the global economy. These twin goals should anchor U.S. economic policy toward India. Key policy recommendations include Asia-Pacific economic cooperation, a bilateral investment treaty (BIT), focusing on states (recognizing greater federalism in the Indian economy), and championing free market principles

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