Agroforestry / September 9, 2016

Economy and Agriculture between India and the United States

As part of its Pivot to East Asia policy, the United States is engaging an actor that does not belong to the Asia Pacific region, India. By seeking a closer relationship with India, the US ventures into the entirely new region that is the Indian Ocean world. This strategic partnership is influenced by the fact that India is more open than most of its neighbouring nations when it comes to cooperation with the West.

Economy and Agriculture between India and the United States

India is a rapidly emerging economy as well as the second largest national market in the world. In the 21st century, India’s largest export partner, at 15.2%, is the US, to where it exports heavy metals, machinery, cereals, and pharmaceutical products. However, when it comes to imports, India’s largest commercial partner is China at 15.4%, with whom it trades petroleum, machinery, and chemicals. Regarding imports into India, the US lags pretty far behind at 5.1%. Nevertheless, India is a major producer of agricultural commodities and, furthermore, it represents the only Asian economy able to compete with or present a regional counterbalance to China.

Given India’s geographic projection into the middle of the ocean, it is important to point out that most of the nation’s borders are maritime and that cargo ships transport most of its internationally traded goods. Heavily reliant on the Monsoon rains for its agricultural output, India produces large quantities of rice, wheat, cotton, tea, and oilseed, amongst others. The Indian Ministry of Agriculture, has forecasted an overall grain production of 252.2 million metric tons (MMT) for the 2015/16 season, given the favourable amount of Monsoon rains. With a staggering population of more than 300 million head of cattle and water buffalo nationwide, India’s total beef and buffalo meat (carabeef) production is expected to increase to 4.4 million tons in 2017. While a majority of India’s buffalo meat production is consumed by domestic demand, an estimated 2 million tons are exported within the Indian Ocean to regions such as Southeast Asia, the Middle East, and East Africa.

Even though India is an integral part of the United States’ political and security strategy regarding the ‘Pivot to East Asia’ policy, it seems as if India is too geographically distant to be fully incorporated economically. For example, India is not one of the member states of the proposed Trans-Pacific Partnership (TPP) given that it is not located in the Pacific Ocean, as the name of the partnership indicates. Similarly, there is no Free Trade Agreement in place, or being negotiated, between the United States and India. Thus, in spite of the increased political and diplomatic interaction between the two nations, the potential for food and agriculture exchange through trade has not yet been exploited. This economic sector is particularly promising in India, where there is substantial demographic growth and an enlarging middle class as well as large fertile regions for agricultural development.

Another important element in regards to the US policy towards Asia is that, in spite of the need to maintain close relationships with India, alternative structures of regional integration are also seeking India’s attention. Chief amongst these is the proposed Regional Comprehensive Economic Partnership (RCEP) amongst South and East Asian nations. The RCEP would create an enormous trade bloc in Asia, whose members are leading producers of a wide array of tropical fruits, grains, and other agricultural commodities.

(Read more about Agricultural Production along the Indian Ocean)

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