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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 fora. 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. ECONOMIC REFORMS After a short slow-down, India's economic growth is returning to around six percent. Inflation is low, exports are growing, and foreign exchange reserves are within comfortable ranges. The rupee has been generally stable, although it has recently weakened. 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. The government has cut food and fertilizer subsidies in February. We continue to work with the Government of India to strengthen its legislative environment for the protection of intellectual property. INFORMATION TECHNOLOGY Information technology is one of the great success stories of the India economy in recent years. India's software and services industry is expected to grow by over $80 billion by 2008. This sector has made major contributions to the U.S. economy as well, providing services, personnel, creativity, and an entrepreneurial spirit to both countries. In 1999-2000, over 62 percent of India's software exports went to Canada and the U.S. The IT field is faced with real obstacles to growth, however. While India has made some efforts recently to develop a more pro-competitive legal and regulatory environment that encourages long-term private investment, 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 $6 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. COMMERCIAL DISPUTES 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. [End of document]
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