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March 25, 2023


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What is friendshoring, and does it help India?

3 min read

The US is ‘friendshoring’, and a key beneficiary could be India. US treasury secretary Janet Yellen recently said that as the US tries to reduce risks to the supply chain, it is keen to deepen integration with trusted partners like India. Mint explains the new term in town.

What does friendshoring mean?

Friendshoring aims to encourage trade and deepen economic relations among trusted trading partners; strengthen supply chains; and diversify away from nations which could pose geopolitical and security risks to the global supply chain. In the post-pandemic world rocked by geopolitical headwinds, the concept emerged as an alternative model for international trade. This would reduce overdependence on countries which could pose a security risk and are a single source of critical inputs and raw materials. However, limiting the trade of key inputs to trusted countries could reverse the gains of globalization.

How does India figure in US friendshoring?

In the backdrop of a challenging global economic outlook and geopolitical instability, Yellen said during her India visit in mid-November that the US would continue to deepen economic relations with India, as it pursues its friendshoring approach with trusted trading partners. She also stated that the global economic trajectory would be shaped by the work that the two countries undertake together. The US treasury secretary called on India to play an important role, especially in handling debt restructuring of middle and low-income countries as it assumes the G20 presidency.

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What does India-US trade data look like?

In 2021-22, US re-established itself as India’s largest trading partner. Bilateral trade between the two was worth $119.41 billion. India’s trade surplus with the US stood at $32.8 billion in 2021-22. In terms of exports, US is India’s largest trading partner, while in terms of imports, US ranks third. Also, US is the top source of foreign portfolio investment in India.

Does it run counter to multilateral pacts?

Friendshoring should be practised in true spirit among countries committed to democracy and peace. Within the bloc, no country should patronize another country, especially one harbouring terrorism. It is important to note that WTO with a broadened trade agenda was set up at the initiative of the OECD countries mainly to protect interests of the US and European countries. Thus, though a country is entitled to act in its own interests, frequent changes in strategy and gameplan may not sound well.

What strategy should India adopt?

With India preparing to take over G20 presidency in December, it should capitalize on this unique opportunity and contribute to the global agenda. It should work towards further strengthening bilateral trade relations with major trading partners. However, the country should also continue to actively trade with nations with which it has established steady and time-tested trade relations and explore trade opportunities which work to the benefit of its citizens.

Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH




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