16:43 GMT23 January 2021
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    India and the US have expressed hope on several occasions over the past year that they could conclude a mini-trade deal before moving on to a broader one. However, the issues related to agriculture exports and tariffs on medicine remain major stumbling blocks between the two countries.

    While praising the improvement in defence ties, America's envoy to India Kenneth Juster has said he is disappointed that progress on a bilateral trade deal which has been pending since November 2019, has stalled.

    He said that “there are frictions and frustration on the trade and investment front”.

    “Despite persistent efforts, we are unable to conclude even a small trade package. Moreover, there are growing restrictions in India and market access for certain US goods and services,” Juster added on Tuesday.

    The diplomat also expressed apprehension about the “self-reliant India” initiative, which was launched by Prime Minister Narendra Modi last summer to curb the dependency on foreign products and services.

    “It remains to be seen whether all of these policies (including self-reliant India) are compatible and mutually reinforcing or if they will lead to higher tariff and non-tariff barriers to trade. [The self-reliant policy] will limit India's capacity to integrate into the global value chain,” Juster emphasised.

    As the US and others find it increasingly difficult to operate in China or seek to diversify away from Chinese-led supply chains, India has a strategic opportunity to become an alternative destination for manufacturing and investment in the Indo-Pacific region, the ambassador said.

    In 2019, bilateral trade in goods and services surged to $146.1 billion, significantly up from the $18.6 billion it was in 2001. Cumulative US direct investment in India reached around $46 billion in 2019. The actual figure for all sources of US investment is much higher, with American companies being the largest investors in India contributing over five million jobs to the country.

    However, the two countries had set a target to achieve $500 billion in bilateral trade by 2025 with the help of a broader trade deal between them. India has been negotiating a trade deal with the US since it withdrew from the China-led free-trade agreement between the Association of South-East Asian Nations (ASEAN) and six other nations - India, China, Japan, Australia, South Korea, and New Zealand last year.

    During his visit to India in February 2020, US President Donald Trump also expressed hopes that a mini-trade deal should be agreed by the end of 2020 to boost the trade. However, the agreement never came true.

    Maintaining that higher tariffs are imposed on US products by India, the Trump administration demanded a greater leeway on items like chicken legs and wanted access to the Indian dairy market. The US administration also raised concerns over increasing tariffs on medical equipment. India, for its part, wanted a revocation of the Generalised System of Preference (GSP) ban.

    The Trump administration withdrew the GSP status from India in June 2019, affecting the country's exports of $5.6 billion. Under the GSP, the US had been providing duty-free access to around 2,000 Indian products.

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