PM's U.S., Egypt visits to have ‘cascading impact’ on economic growth: SBI

Prime Minister Narendra Modi's recent visits to the U.S. and Egypt mark significant long-term economic gains for India, and could have a "cascading impact" on economic growth in India and extended neighbourhood, SBI Research Group Chief Economic Adviser Soumya Kanti Ghosh says in its latest Ecowrap report.

The Prime Minister last month visited the United States and Egypt to deepen bilateral economic and strategic ties. The bilateral talks touched upon developments in semiconductors, defence trade, climate finance, WTO trade disputes and India's economic interest, along the Suez Canal.

During the PM's U.S. visit, the U.S. chip manufacturers announced a foreign direct investment worth $825 million, with a combined investment of $2.75 billion to set up a semiconductor assembly and test facility in India. Micron Technology, a global leader in chipmaking, announced an investment worth $825 million to build a new semiconductor assembly in Gujarat.

As there are “multiple disruptive developments taking place in chips manufacturing and supply-chain globally, where the dominance of China is being curtailed through collaborative arrangements among biggies like U.S., Japan, Taiwan, South Korea, Netherlands (and, now India), the strategic alliances between these two nations assumes paramount importance to guide the uncertain future amidst escalating geopolitical tensions," writes Ghosh.

The report adds the India-U.S. defence ties will move under two tracks in future -- greater collaborations and strengthening of existing foundation pacts. "A reciprocal defence procurement agreement will also be explored in due course which can increase the share of India in defence trade with the U.S. which has fallen to 19%."

Additionally, to achieve the goals of net-zero, many important collaborations were announced in areas of green hydrogen, biofuel, sustainable aviation fuel and critical minerals. In one of the MoUs, the U.S. Agency for International Development will support Indian Railways’ ambitious target to become a "net-zero” carbon emitter by 2030. This payment mechanism will facilitate the deployment of 10,000 made-in-India electric buses in India.

Also, a platform will be created that will attract private capital into India for deployment in green technology projects such as batteries, renewables, storage etc, which is expected to lower the cost of capital for the green transition.

Also, the bilateral meetings resolved the six major pending disputes at the World Trade Organisation (WTO), mainly related to steel, aluminium, renewable energy, and solar cells, 3 of which were raised by the U.S. against India and 3 raised by India against the U.S. The SBI report says it will “provide significant impetus to raise India's steel and aluminium exports by about 35%”.

The Prime Minister also visited Egypt where pacts were signed in agriculture, archaeology & antiquities and competition law. Egypt is studying the possibility of allocating a special area of land for Indian industries in the Suez Canal Economic Zone.

"The Suez Canal holds significant importance for Indian trade. Out of the total 4.8 million barrels per day of crude oil shipped and transported through the canal, 500,000 barrels per day of crude is shipped to India and is important for shipments to Europe," the report adds.