In the annals of the bilateral ties between the United States and India, Prime Minister Narendra Modi’s visit in 2024, for the Quad Summit in Delaware in September, will play second fiddle to the monumental state Visit of 2023. However, it was potentially significant in moving the needle on a larger geostrategic view of the Indo-Pacific.
U.S. President Joe Biden and Mr. Modi both underscored their shared interests. Now comes the hard task of implementing shared understandings, especially with the uncertainty of a U.S. presidential election ahead and questions about what foreign and trade policies may be in place in the next administration.
More broadly, the Delaware discourse also solidified New Delhi’s priorities in global economic leadership as India communicated its formal acceptance of two landmark agreements under the Indo-Pacific Economic Framework for Prosperity (IPEF). The IPEF agreements, on clean economy and fair economy, along with the earlier supply chain agreement, signal a commitment to shared economic goals, marking a bold step toward resilience and sustainable development. The four pillars under the IPEF are: trade (Pillar I); supply chains (Pillar II); clean economy (Pillar III); and fair economy (Pillar IV).
Albeit not a trade bloc, IPEF with its 14 partner countries represents 40% of global GDP and 28% of global goods and services trade, in a dynamic region that features the The Strait of Malacca, one of the most important shipping lanes globally.
But beyond the formalities, what does this moment signify for New Delhi, the Indo-Pacific region, and the world?
For one, trade experts say New Delhi is staying involved and open to new creative approaches in the region. Time will tell, come January 2025, how a new U.S. administration approaches IPEF and whether it will truly have global impacts when compared to deeper regional trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
A rise in trade
One thing is clear. U.S.-India trade is on the uptick as reports show that India’s merchandise exports to the U.S. have risen by over 50% (54.4%) from $54.3 billion in 2018 to $83.8 billion, as reported in 2023.
However, Indian exporters are still eyeing the restoration of the Generalized System of Preferences (GSP), which Washington withdrew from New Delhi back in 2019 during the Trump administration. The GSP has been sacrosanct to many emerging economies to gain duty-free access to more mature markets.
Pillar III of the IPEF underscores New Delhi’s commitment to a clean economy, as Mr. Modi at COP26 in Glasgow, Scotland, in 2021, set an ambitious, yet realistic, target of India achieving net zero carbon emissions by the year 2070.
Clean economy goal and benefits
As Climate Week concluded in September, the U.S.-India clean energy partnership is vital in helping India realize its net zero goals. The IPEF represents a broader goal to transform how nations collaborate on energy security, reduce their carbon emissions, and deploy green technologies more rapidly in order to build and sustain a clean energy economy.
By aligning itself with this vision, New Delhi reinforces its role as an advocate for climate resilience while securing economic benefits through technical cooperation and capacity-building.
Working towards a clean economy also unlocks financial opportunities in climate financing and green bonds. Investments in renewable energy projects and technology transfers will allow India’s industries, especially the micro, small, and medium enterprises (MSME), to integrate more deeply into global value chains.
The fair economy agenda
On IPEF’s “fair economy” agenda, this Pillar aims to cultivate a transparent, predictable governance environment across the Indo-Pacific, a region with many countries and ergo multiple barriers and trade complexities.
With 14 markets, from as large as the U.S. to as tiny as Brunei and Fiji, there is an eclectic sense of the diversity and the unevenness in the IPEF economies. However, Pillar IV, on fair economy, touches on the pertinent need for international cooperation — one that must transcend borders, political ideologies, and economic size.
By espousing a “fair economy”, the focus is to mitigate hurdles endemic in certain emerging markets, from opaque regulatory requirements to tax policies that encourage corrupt behaviour. Issues such as cross-border money laundering and terror financing are pernicious threats, both in terms of national security and economic integrity. As the fifth-largest and one of the fastest-growing economies, India needs to generate investor confidence, and creating a reliable trade environment is vital.
Given India’s rapid economic growth, the need to upgrade and upkeep on infrastructure is vital and a “fair economy” is vital to wooing big-scale investments for India’s big push on infrastructure.
A focus on supply chains
Perhaps the most lasting legacy of the IPEF will be in creating more resilient supply chains, under Pillar II. The COVID-19 pandemic exacerbated and exposed lacunas in our supply chains, showing that supply chains disrupted in China cannot mean supply chains disrupted around the world. Companies and nations have become cognisant of the importance of supply chain diversification.
Under the Quad, the four member-democracies (Australia, India, Japan, and the U.S.) are committed to rejigging and rebuilding supply chains. More specifically, Washington and New Delhi are committed to investing in high-end semiconductor manufacturing facilities, which will give India’s manufacturing potential a boost as well as add to Washington’s core priorities of friend-shoring under a national security umbrella.
India’s participation in the IPEF supply chain agreement is pivotal, solidifying its commitment to minimising vulnerabilities. As one of the world’s largest economies, India’s ability to produce, distribute, and innovate in sectors such as pharmaceuticals and electronics will be key to the wider Indo-Pacific region.
Collaboration within the IPEF, particularly in the Initiative on Critical and Emerging Technologies (iCET)-related sectors such as cyber security and artificial intelligence, will ensure that India remains at the forefront of technological advances and consolidates modern supply chains.
Ultimately, the IPEF represents more than a series of trade and investment agreements. It is a strategic effort to cement partnerships in the region.
The framework’s focus on inclusive growth, environmental sustainability, and fair economic competitiveness is closely aligned with India’s domestic vision and foreign policy ambitions of a multipolar world.
The pillars of supply chains, a clean economy, and a fair economy may start to reshape economic relations in the region. At a time when China’s Belt and Road Initiative (BRI) is leading to debt traps, the IPEF seeks transparency and open dialogue.
In this moment of geopolitical turbulence, and global economic uncertainty, consensus building is vital. While progress in the Quad, particularly on the strategic front, is showing real results, the IPEF still has some groundwork ahead of it.
Akshobh Giridharadas is a former Singapore based broadcast journalist and now handles Strategic Communications for the US-India Strategic Partnership Forum (USISPF). Mark Linscott is the Senior Advisor for Trade Policy at the US-India Strategic Partnership Forum (USISPF) and former long-time U.S. trade negotiator for South and Central Asia/India for the United States Trade Representative (USTR)
Published – November 04, 2024 05:02 am IST
