ELECTRONICS AS THE NEW FRONTIER: STRENGTHENING INDO-US TRADE TIES
By Kapil Gupta
In the intricate game of global trade, akin to a grand chessboard, India and the U.S. stand together on the same side, strategizing as allies. Their moves, carefully coordinated and mutually beneficial, centre around technology and market opportunities, particularly in the electronics sector. This partnership, reflective of a modern adaptation of the ancient chess game, is about making calculated moves that advance shared interests and reshape the power dynamics in international trade, especially within the domain of electronics.
Historical Context und Current Landscape
Trade between India and the U.S. has a rich tapestry that dates back centuries. From the early days of the spice trade, which brought exotic flavours to American shores, to the modern era’s quest for software and services, this bilateral relationship has been marked by a spirit of innovation and mutual benefit.
The trade numbers between the two nations have grown steadily over the years, and yet, when one considers the scale of the U.S. market and India’s manufacturing capabilities, it’s clear that the surface has only been scratched, particularly in the high- stakes electronics sector. A closer look at the historical trade volumes reveals that the electronics trade between India and the US in the last five years has grown by a massive 742%, although in comparison with competing electronics manufacturing nations, there is still scope for huge improvement.
The Electronics Trade Opportunity
The U.S. has always been a powerhouse of consumption, particularly for electronics. The market is vast, with American homes and businesses continuously seeking the latest in technology. Currently, much of this demand is met by imports, with a significant portion originating from China.
FIGURE 1: US IMPORTSELECTRONICS FROM
The global trading environment experienced a seismic shift when the U.S. imposed a 25% tariff on Chinese imports in 2018. This significant move not only reshaped trade flows but also created a vacuum in the market. This shift has presented the Indian Electronics sector with a pivotal opportunity to step up and fill the gap. However, this reliance is being re- evaluated due to geopolitical tensions and supply chain risks. With its burgeoning electronics manufacturing sector, India is poised to make a significant impact. The sector’s recent surge to over USD 100 billion in FY 2022-23, coupled with projections of tripling to USD 300 billion within the next three years, positions India as a pivotal force in diversifying the U.S. supply chain and reshaping the landscape of global electronics trade.
FIGURE 2: TRADE OF TOP ELECTRONIC GOODS BETWEEN INDIA AND THE US
Indo-US Task Force for Electronics
In August 2023, the India Cellular & Electronics Association (ICEA) launched the Indo-US Task Force for Electronics, heralding a new chapter in this strategic partnership.
Main Goals of the Indo-US Task Force for Electronics
Expand Trude: Aim to increase the value of electronics trade between the two nations to USD 100 Billion in the next ten years.
Promote New Ideas: Support the creation of new technology and products that benefit both countries, in line with the shared vision for technology between the U.S. and India.
Create Jobs: Build new job opportunities and support business growth in both Indian and American markets.
This initiative is not just a series of meetings and agreements; it’s a concerted effort to align India’s growth in electronics manufacturing with the U.S.’s need to diversify its electronics import sources.
Historical und Present Context to Indo-US Trade
Reflecting upon history, the relationship between India and the U.S. has been one of ebbs and flows. From the Cold War era, when India’s non-alignment seemed at odds with U.S. interests, to the post-liberalization boom which saw India emerge as a global IT services giant, the journey has been transformative. Today, we stand at another inflection point, where electronics have become the new currency of power and exchange. The U.S., in its pursuit of technological security, looks to India as a trusted partner that can offer both scale and skill.
Strategic Importance of the Electronics Sector
The strategic value of the electronics sector cannot be overstated. It’s not just about consumer goods; it’s about the very tools that power our economies, secure our data, and drive our innovations. India’s policy environment is increasingly conducive to electronics manufacturing, with reforms aimed at attracting investment and building capabilities.
This policy shift is a clear signal of India’s commitment to becoming an electronics powerhouse.
Challenges and Recommendations
However, the path ahead is not without its challenges. India’s infrastructure, while improving, needs significant investment to support a large-scale electronics industry. Regulatory processes can be complex and time-consuming, often posing hurdles for businesses. Moreover, the skill gap in the labour market is set to be addressed to ensure a workforce capable of high-tech manufacturing. The Task Force should recommend a multi-pronged approach to tackle these issues, emphasizing the need for infrastructure development, regulatory streamlining, and skill development.
Conclusion and Call to Action
The Indo-US Task Force for Electronics, an initiative spearheaded by the ICEA in August 2023, is a pivotal development in the collaborative journey of these two nations. While it enjoys government support, it’s crucial to recognize its roots in the
ICEA’s vision and leadership. This Task Force is emblematic of the synergistic potential between Indian and U.S. industries and stakeholders in the electronics sector.
As we look to the future, the endeavours of this Task Force highlight the combined strength and strategic intent of India and the U.S. in global electronics trade. This partnership, fostered by industry-led efforts and bolstered by governmental backing, transcends traditional trade dynamics. It is a testament to how aligned industry goals and collaborative efforts can open new doors for innovation, economic growth, and a more resilient supply chain.
The alliance forged through the Task Force is set to redefine international cooperation in the digital era. By joining forces, the two nations are poised to catalyse significant advancements in electronics, benefiting not only their economies but also setting a new standard for industry-led international collaborations. The chessboard is set, and with this strategic alignment, India and the U.S. are making moves that promise widespread benefits and mark a new chapter in the global electronics trade.
Author:
Kapil Gupta is Deputy Director – Public Policy, ICEA
