Economic relations have been the backbone of the rapidly strengthening strategic relationship between India and United States. Both the countries play a major role in shaping the global economy--while US is the world's largest economy, India is second fastest growing major economy. And between them, they account for about 27 per cent of the world production.

Further, with the Indian economy estimated to grow to 90 per cent of the US economy by 2050, the growing Indo-US relationship will be a decisive force shaping the contours of the world economy in the 21st century.

Trade

Trade has always played a significant part in the rapidly expanding multi-faceted bilateral relations between India and US. From a modest US$ 5.6 billion in 1990, the bilateral trade in merchandise goods between the two countries has increased to US$ 31.5 billion during 2006-07. Significantly, India enjoyed a trade surplus of US$ 6.4 billion in the last fiscal.

Further, with the continued buoyancy in the trade between both the nations, bilateral trade is well on way to cross US$ 50 billion in 2007-08. Consequently, the bilateral trade target of US$ 60 billion by 2010 is likely to be achieved well ahead of time.

Country-wise, India's exports to US have increased tremendously from about US$ 10.52 billion in 2000-01 to US$ 18.87 billion in 2006-07. The growth momentum continues in the current fiscal with US$ 9.85 billion worth of goods being exported to US during April-September 2007 as against US$ 9.38 billion in the same period previous year. Some of the major items that India exports to the US are gems and jewellery, cotton, accessories, machinery and instruments among others.

Similarly, India's imports from India (or US export to India) have increased from US$ 3.41 billion in 200-01 to US$ 12.6 billion in 2006-07. During April-September 2007 imports increased to US$ 6.43 billion from US$ 5.06 billion in the same period previous year. Major imports from the US include transport equipment, electronic goods and machinery.

Buoyed by this surge in the bilateral trade levels both countries are planning a limited bilateral trade agreement initially, involving sectors like HRD, energy, infrastructure and financial services among others.

US investments in India

India's rapidly expanding economy along with the booming consumer market and easy availability of skilled personnel has been instrumental in several American companies investing in India. In fact, US has been the second largest foreign direct investor in India. It accounted for 9.12 per cent of the total FDI inflows into India during April 2000-December 2007.