Emerging as the largest bilateral trade partner, the USA is the favorite destination for Indian exporters. Both countries have a target to reach $100 billion of bilateral trade in the next few years, opening up the vast number of opportunities for Indian exporters. Ximpex brought to you a case study where we are going to discuss the right opportunities available to India's exporter and the challenges ahead, especially for the MSME's of India.
The Dynamics of the US Market
The USA is a consumer-driven economy representing 26% consumption of the world's goods and services by 5% of the population. Personal Consumption Expenditures(PCE) was at $14.799 trillion as of the fourth quarter of 2019, according to the Bureau of Economic Analysis (BEA), and the GDP was at $21.542 trillion for the same quarter. As per the latest indicators, goods, where the consumption is increasing, are recreational goods, vehicles, food products and beverages, and personal care items. About 20% of spending was on food and clothing, and about 14% was spent on cars and furniture items. All these dynamics show positive signs of growth in consumer spending and higher demand for goods and services.
The Dynamics of US Imports
In 2018, the USA imported $2.6 trillion worth of goods and services. It means each person in the US spent $9,457 on imported goods and services. The highest imported product was the computer hardware ($386.4 billion), followed by electrical machinery ($367.1 billion), vehicles and automobiles ($306.7 billion), minerals, fuels and oil ($241.4 billion), Pharmaceuticals ($116.3), Medical equipment and supplies ($93.4 billion), Furniture, Lighting, and Signs ($72.1 billion), Plastics ($61.9 billion), Gems and precious metals ($60.8 billion), and Organic chemicals ($54.6 billion). Also, India is the second-largest supplier of textiles to the USA.
The Opportunities for Indian Exporter's
Indian goods are lucrative for US Importers primarily due to uniqueness, quality, and cost-advantage. Currently, the USA offers vast potential to the exporters of chemicals, pharmaceuticals, textiles, food products, electrical equipment, and footwear. If you are manufacturing any of these goods, then the USA is the most promising market in the world.
Challenges for Indian Exporter's
Removal from the developing countries list
As per WTO guidelines, the exporters of the developing countries and underdeveloped countries get the preferential trade status overdeveloped countries in terms of customs and duties. Recently, the USA has removed India from its developing countries list, which can result in higher tariffs for the Indian exporters.
Stiff Competition from other countries.
Since the USA is an open market, it is free for the exporters of 191 countries- equally lucrative for all. Countries like China and have high scale production in their favor, Bangladesh has cost-advantage over Indian textiles, 20 countries have free trade agreements with the USA, and India is not a part of them- are the few examples.
The distance between the USA and India is also very vast. The quality standards are stringent in the USA. All these factors combined pose significant challenges for Indian exports- especially the MSMEs.
Ximpex support's the Indian exporters in overcoming all the challenges and barriers to export. We are an integrated platform helping the Indian companies in overall growth in international trade. Stay connected to discover more.
Author:- Sachin Yadav