March 2020: Could India replace China as the biggest Supply Chain partner to U.S.?

We know the effects of Coronavirus on a body and we’re finding out how much damage it does to the global Supply Chain and the global Economy.

Supply-Chain disruption has happened before, with an odd earthquake, factory fire or some port strike. But the Coronavirus is a shock for the global economy. The carnage will be substantial for both large companies such as Apple, and Amazon, which relies heavily on products from third-party and at the same time, mom-and-pop shops too in the US.

India – US Trade:

U.S. trade with India totalled an estimated $142.6 billion in 2018 an increase of 115% in the last 10 years.  Exports were $58.7 billion; imports were $83.9 billion.

U.S. imports from India account for 2.1% of overall U.S. imports in 2018 The top import categories in 2018 were: precious metal and stone (diamonds) ($11 billion), pharmaceuticals ($6.3 billion), machinery ($3.3 billion), mineral fuels ($3.2 billion), vehicles ($2.8 billion)  and Shrimp ($2.1 billion).

China – US Trade:

U.S. goods and services trade with China totalled an estimated $737.1 billion in 2018. Exports were $179.3 billion; imports were $557.9 billion. The U.S. goods and services trade deficit with China was $378.6 billion in 2018.

The top import categories in 2018 were: electrical machinery ($152 billion), machinery ($117 billion), furniture and bedding ($35 billion), toys and sports equipment ($27 billion), and plastics ($19 billion).

Opportunity for Indian firms?

Well, Indian small & medium companies championing the domestic market could seriously look at targeting industries such as Machinery & Mechanical Appliances (Generators, Turbines, Boilers, Machine Tools, & Bearings), Furniture and Bedding, Plastics (Tableware, Kitchenware, Packaging of Goods), Footwear, Leather, Rubber, Ceramic Products, Aluminium and other products, which are close to US $260 Billion dollars of exports from China to US.

It is important for Indian firms to take advantage of the close relationship between the two countries (India-US) and disrupt the supply chain which is up for grabs.

US- India Closer Ties:

In the past 20 years since 2000, there have been four visits by 3 US Presidents — Bill Clinton in 2000, George W Bush in 2006, and Obama in 2010 and 2015. Trump’s is the fifth. While only three of the nine US Presidents during 1947-2000 visited India, every President in the last two decades has visited India at least once. Many reasons could be ascribed to the higher frequency of visits — a shift in global geo-politics in the post-Cold War era, India’s economic ascent, rise of an assertive China, and New Delhi’s place on the global high table.

India and the US made landmark progress in 2018 to bolster their strategic and defence ties from holding the maiden trilateral meeting with Japan to the first-ever 2+2 dialogue during which they signed the long-pending COMCASA agreement that would open the way for sales of more sensitive US military equipment to India. The co-operation between India and the US has reached a new level when it comes to the Indo-Pacific region. The two countries are working with other like-minded partners in the Indo-Pacific to ensure that there is freedom of navigation and peace in the resource-rich region where China has been trying to spread its influence.

For the U.S., mending all bilateral ties with India is an extension of the Quadrilateral (Quad) framework involving the U.S., Japan, Australia and India, to be a formidable force in this multi-polar world. For India, it is the most obvious route to fortify its digital dreams and power its run to become a $5 trillion economy over the next few years.

For India, its relationship with the US on defence issues has strengthened. India has procured over $18 billion worth of defence items from the US, almost half of this in the last five years. India conducts more bilateral exercises with the US than with any other country. And, under Trump, the announcement of India’s elevation to Tier I of the Strategic Trade Authorization licence exception has opened up US defence technologies from the time when India faced a technology-denial regime.

The other area where the relationship has grown in recent years is energy. The bilateral Strategic Energy Partnership was launched in April 2018; India has started importing crude and LNG from the US from 2017 and 2018 respectively. The total imports are estimated at $6.7 billion — having grown from zero.