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The narrative surrounding the economic relationship between the United States and India has long been dominated by claims of a trade deficit favoring India, particularly voiced by former US President Donald Trump. However, a recent report by the Global Trade Research Initiative (GTRI) sheds light on a more nuanced reality, suggesting that the US may be significantly underestimating its earnings from India. While the US government continues to focus on the goods trade deficit, which it estimates to be around $45 billion, the GTRI argues that this figure fails to capture the extensive revenue streams flowing from India to the US through various channels, including education, technology, financial services, intellectual property, and defense. The report estimates that the US could be earning as much as $80–85 billion annually from India, resulting in an overall trade surplus for the US. This challenges the conventional wisdom and calls for a reevaluation of the economic dynamics between the two countries, especially as they engage in negotiations for a Bilateral Trade Agreement (BTA). One of the most significant contributors to American earnings from India is the higher education sector. Each year, a substantial number of Indian students pursue education in the United States, spending approximately $25 billion. This expenditure is divided between tuition fees, accounting for around $15 billion, and living expenses, which amount to about $10 billion. These students are primarily concentrated in prestigious universities such as the University of Southern California, New York University, Purdue University, and Northeastern University, where annual expenses can range from $87,000 to $142,000 per student. The flow of funds from India to the US for education effectively makes higher education one of America’s biggest ‘exports,’ although this fact is often overlooked in traditional trade calculations. Beyond education, the technology sector plays a pivotal role in generating revenue for US companies in India. Digital giants like Google, Meta, Amazon, Apple, and Microsoft reportedly earn between $15–20 billion annually through various services offered in India. These services include cloud storage, digital advertising, app store sales, subscription models, and software services. The GTRI report emphasizes that these substantial profits are further amplified by what it terms ‘limited local rules on data and taxation,’ which enable these tech firms to repatriate the majority of their earnings. This allows these companies to maximize their profits in India while contributing less to the local economy in terms of taxes and data localization. Financial and consulting services constitute another significant source of American income from India. Firms such as JPMorgan, Goldman Sachs, Citibank, McKinsey, Deloitte, KPMG, and PwC generate an estimated $10–15 billion in annual revenue through their operations in India. They provide investment banking, financial advisory, and consulting services to India’s burgeoning financial and corporate ecosystem, advising on mergers and acquisitions, risk management, and business transformation. Their expertise is highly sought after, particularly as India’s economy continues to grow and become more integrated into the global market. Intellectual property and licensing represent a less visible but crucial aspect of American income from India. US pharmaceutical companies, including major players like Pfizer, Merck, and Johnson & Johnson, are estimated to earn between $1.5–2 billion annually through licensing agreements, patent royalties, and technology transfers with Indian partners. Similarly, US automobile companies, such as General Motors and Ford, make between $800 million and $1.2 billion annually through technical service fees and licensing deals with Indian auto manufacturers and component suppliers. The protection of intellectual property and the enforcement of licensing agreements are vital for these companies to maintain their profitability in the Indian market.
The realm of culture and media also contributes to American earnings from India. Hollywood studios and American streaming platforms such as Netflix, Amazon Prime, and Disney are estimated to earn between $1–1.5 billion annually from India. These earnings are derived from box office revenues, content licensing, and subscription-based digital platforms targeting Indian consumers. The growing popularity of American films and television shows in India has created a lucrative market for these companies, further bolstering the US’s economic advantage. Moreover, Global Capability Centers (GCCs) operated by American multinationals play a significant role in the US’s economic footprint in India. Companies such as Walmart, Dell, IBM, Wells Fargo, Cisco, and Morgan Stanley run these centers in Indian cities like Bengaluru and Hyderabad. These centers employ thousands of Indian professionals in fields such as analytics, technology development, and operations. According to the GTRI, these GCCs generate $15–20 billion annually in revenue from India-based operations, but most of the value accrues to the US parent entities. These earnings are not factored into bilateral trade deficit figures, even though they represent a substantial inflow of value to the American economy. The defense sector is another substantial but confidential component of US earnings from India. While specific numbers remain classified, the cumulative value of American arms deals and technology transfers to India has run into billions over the past decade. This includes fighter aircraft, helicopters, surveillance systems, and missiles, many of which are secured under the Foreign Military Sales (FMS) program and other government-to-government channels. These defense exports represent a significant source of revenue for US companies and contribute to the overall economic imbalance between the two countries. The GTRI report highlights the importance of these overlooked revenue streams in understanding the true economic relationship between the US and India. By focusing solely on the goods trade deficit, the US is missing a significant portion of the picture and potentially undervaluing its economic advantage. The report argues that India is not just a passive trade partner but a major contributor to American wealth across education, technology, finance, and defense. As India and the United States engage in negotiations for a Bilateral Trade Agreement (BTA), the GTRI urges Indian negotiators to push back against ‘hollow deficit arguments’ and to resist pressure to make unilateral concessions in areas like digital trade, intellectual property rights, and market access, where American companies are already dominant earners. The report emphasizes that India should negotiate the free trade agreement from a position of strength, rejecting hollow deficit arguments and demanding fair, balanced, and reciprocal terms.
The context surrounding these negotiations is critical. India and the United States aim to double bilateral trade to $500 billion by 2030, indicating a strong commitment to strengthening their economic ties. However, the GTRI report underscores the need for India to approach these negotiations with a clear understanding of the true economic dynamics between the two countries. By focusing on the overlooked revenue streams, India can better assert its position and ensure that the agreement reflects a fair and balanced relationship. The call for India to negotiate from a position of strength is not just about securing favorable terms in the BTA; it also reflects a broader recognition of India’s growing economic power and its increasing importance in the global economy. India’s burgeoning middle class, its rapidly growing technology sector, and its strategic location in the Indo-Pacific region make it an increasingly attractive market for foreign investment and trade. As India continues to develop and integrate into the global economy, it is essential that it assert its interests and ensure that its economic relationships are based on mutual benefit and respect. The United States, on the other hand, needs to acknowledge the full extent of its economic gains from India and move beyond the narrow focus on the goods trade deficit. By recognizing the contributions of sectors such as education, technology, and financial services, the US can foster a more balanced and sustainable economic relationship with India. This requires a shift in perspective and a willingness to engage in a more nuanced and comprehensive assessment of the economic dynamics between the two countries. In conclusion, the GTRI report provides a valuable contribution to the ongoing debate about the economic relationship between the United States and India. By highlighting the overlooked revenue streams flowing from India to the US, the report challenges the conventional narrative of a trade deficit and calls for a reevaluation of the economic dynamics between the two countries. As India and the United States engage in negotiations for a Bilateral Trade Agreement, it is essential that both countries approach these discussions with a clear understanding of the true economic realities and a commitment to forging a fair, balanced, and mutually beneficial relationship. The report’s findings underscore the importance of moving beyond simplistic trade deficit calculations and embracing a more comprehensive assessment of the economic ties that bind these two nations together.
Source: How the US is secretly making billions off India as Trump continues to cry trade deficit