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The President's Trip to South Asia
U.S. ECONOMIC RELATIONS WITH INDIA
The U.S. is India's largest trading partner. However, U.S. exports to India lag considerably. U.S. trade with Singapore, for example, is larger than with India, a country of about one billion people. There is great potential for a more robust Indian-U.S. trade relationship. U.S. policy is to urge India to open its markets to a significantly increased number of U.S. products and services.
India is a leading voice among developing countries in the WTO and other international trade. India took a tough stand at the 1999 ministerial in Seattle in opposition to U.S.-supported standards on labor and the environment. We do, however, seek common ground on many economic and trade issues with India and have succeeded in a number of important areas.
In December 1999, we reached agreement on a timetable to lift India's quantitative restrictions on imports of over 1,400 agricultural, textile, and other consumer products.
After a short slow-down, India's economic growth is returning to near six percent. Inflation is low, exports are growing, foreign exchange reserves are within comfortable ranges, and the rupee is stable.
Government deficits at both the federal and state level are a matter of concern. Infrastructure spending has fallen sharply, and improvements are needed in the areas of transportation, communication, and energy to assure continued economic growth.
While economic reform is a top priority for the Indian government, and there have been several significant advances since the current government was re-elected in October 1999, much remains to be done. The Indian parliament passed legislation in December 1999 opening India's insurance sector to foreign investment.
India's parliament currently is considering legislation to strengthen laws governing intellectual property rights and patents, which could move India further toward compliance with international standards.
Information technology is one of the great success stories of the India economy in recent years. This sector has made major contributions to the U.S. economy as well, providing services, personnel, creativity, and an entrepreneurial spirit to both countries.
The IT field is faced with real obstacles to growth, however, as India's limited infrastructure, regulatory red tape, and outdated government policies place limitations and restrictions on the ability of the sector to grow and encourage innovation.
300,000 information technology workers in India generated $3 billion in income for the country in 1998. The IT sector as a whole is growing by 50 percent each year.
There are a similar number of workers of Indian origin now in California's Silicon Valley alone, and thousands of others contribute to American technology and innovation throughout the United States. Sixteen percent of all start-ups in Silicon Valley involve a partner of Indian origin. In the Washington, DC, area, there is a large community of Indian-origin CEOs in the information technology field.
We continue to work with India to address concerns raised by some U.S. businesses over India's economic policies. These include regulatory regimes, coupled with high tariff and tax rates on many goods of commercial interest to U.S. firms. Resolving these concerns would help send a message to the world economic community that India will continue to work to improve its business climate and is a good destination for foreign investment.