Context: According to annual reports of US Trade Representative (USTR), India's recent emphasis on import substitution through the 'Make in India' campaign is one the several challenges facing the bilateral trade relationship.

Key points

• Trade-restrictive policies: India is emphasizing on import substitution through a “Make in India” campaign. It is a challenge to the US-India bilateral trade relationship.
• India’s significance for the USA: India’s large market, economic growth, and development make it an essential market for many U.S. exporters.
• USA revocation of India’s preferential trading status under the Generalised System of Preferences (GSP) program was mentioned.
• In a country-wise section on Digital Service Tax (DST), a Section 301 investigation on India’s DST, is highlighted. 

Mini trade deal package negotiations

• U.S. objectives in this negotiation included resolution of various non-tariff barriers, targeted reduction of certain Indian tariffs, and other market access improvements. 
• The United States also engaged with India on the full range of pressing bilateral trade issues, including intellectual property (IP) protection and enforcement, policy development affecting electronic commerce and digital trade, and market access for agricultural and non-agricultural goods and services.

These issues remain unresolved.
Bilateral Trade between India and USA:

• In 2019-20, the bilateral trade between the USA and India stood at USD 88.75 billion.
• The USA is one of the few countries with which India has a trade surplus.
• India’s trade surplus with the USA increased to USD 17.42 billion in 2019-20 from USD 16.86 billion in 2018-19.
• For the USA, India was the sixth largest supplier of services imports.
• India's large market, economic growth, and progress towards development make it an essential market for USA exporters.

Issues in the Trade Relationship

• Tariffs: Both the countries cite market barriers including both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies.
• Generalised System of Preferences (GSP) Programme: Effective from June 2019, the USA decided to withdraw duty-free benefits to Indian exporters under the GSP programme.
• Services: A key issue for India is the USA's temporary visa policies, which affect Indian nationals working in the United States.
• India also continues to seek a “totalization agreement” to coordinate social security protection for workers who split their careers between the two countries.

Agriculture: Sanitary and phytosanitary (SPS) barriers in India limit USA agricultural exports.

• Each side also sees the other’s agricultural support programs as market-distorting.

Intellectual Property (IP): The two sides differ on how to balance IP protection to incentivize innovation and support other policy goals, such as access to medicines.

Additional Information

Make in India

• In 2014, the Indian government launched the 'Make in India Initiative' in order to give thrust to the manufacturing sector's growth rate to 12-14 per cent per annum.

What is Make in India (Beginning of Indigenous Manufacturing)?

• ‘Make in India’ is a major national initiative that focuses on making India a global manufacturing hub. 
• It is being led by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry.
• The policy approach was to create a conducive environment for investments, develop modern and efficient infrastructure, and open up new sectors for foreign capital.

The three major objectives were

• To increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy; 
• To create 100 million additional manufacturing jobs in the economy by 2022
• To ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%. 
• Key Thrust of the Programme:  Key thrust of the programme is oriented on Cutting down in delays in manufacturing projects clearance and also develop adequate infrastructure to make it easier for companies to do business in India. 
• Key Sectors under the Programme: The focus of Make in India programme is on 25 sectors. These include automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defence manufacturing, etc.