Despite the nuclear cooperation deal, sealed by President George W Bush this month, the US may still lose out to rival China as India’s largest trading partner. India’s bilateral trade with China in 2005 set a new record at $18.71 billion, up nearly 38 per cent from 2004. India had set a target of $20 billion by 2008, but that could be achieved well in advance.

India’s exports to China grew by over 27 per cent in 2005, higher than the overall growth in Sino-India bilateral trade to the extent of nearly 38 per cent. “China should emerge as India’s largest trading partner overtaking the US within a year or two, with two-way trade exceeding $30 billion in 2007,” Nagesh Kumar, director general of Research and Information System for Developing Countries, said. Other analysts think that the US would continue to remain India’s largest trading partner in foreseeable future. Merchandise trade between India and the US stood at about $25 billion in 2005 and is expected to touch $40 billion by 2009.

Bush was gifted Banganapalli mangoes by Andhra Pradesh chief minister YS Rajasekhara Reddy. This small gesture was a giant stride in trade terms considering that for 17 years the US had kept its doors shut to this luscious native of India. “The US is looking forward to eating Indian mangoes,” Bush said. Citing public health concerns, the US has resisted the entry of Indian mangoes.

But with China lurking around the corner, the US can no longer dither on gaining a foothold in the rapidly opening up Indian market. Urgency is seen from the fact that the US has even accepted the assessment system of India’s Agricultural and Processed Food Products Export Development Authority for accreditation of agencies to certify organic produce. India and the US have also sought to expand cooperation in agriculture by launching the “knowledge initiative on agriculture” with a three-year financial commitment of $100 million.

“There is new trust in India’s economic relations with the US,” says Anil K Agarwal, president of the Associated Chambers of Commerce and Industry in India. “The Americans have reposed faith in India’s technological capability. Otherwise they wouldn’t be thinking of a nuclear deal. There is a ‘look East’ policy and India will certainly expand its economic links with China. But the Bush visit has ensured that American investors would now come to India,” Agarwal said.

Technically, the US is India’s second largest source of foreign direct investment (after Mauritius), accounting for 16 per cent of total FDI flows to India between 1991 and mid-2005. While the US had a 17 per cent share in FDI inflows into India in this period, Mauritius topped with 35 per cent. However, a fair amount of US investment is routed through Mauritius because of the island-nation’s reputation as a tax haven.

The American investor is involved in infrastructure, telecom, information technology, pharmaceuticals and biotechnology. “The US will continue to remain India’s largest partner despite the rapid increase in trade with China,” Arun Kumar, professor, Centre for Economic Studies and Planning, Jawaharlal Nehru University, said.

“India-China trade is dominated by products using low or intermediate technologies but with the US it is hi-tech trade as US is far superior,” he added. — IPS