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India has taken a significant step towards strengthening its economic ties with the United States by proposing a critical minerals partnership agreement (CMPA). This strategic move, initiated during the recent visit of India's Commerce and Industry Minister Piyush Goyal to the US, aims to secure substantial benefits for Indian companies, particularly in the burgeoning electric vehicle (EV) sector, within the American market.
The cornerstone of this partnership is the memorandum of understanding (MoU) signed by both countries to enhance cooperation in the supply chain for crucial minerals like cobalt, copper, lithium, and nickel. These rare earths are highly sought after in various clean energy technologies, including EV batteries and wind turbines. While Goyal has advocated for elevating the MoU to a partnership agreement, which could serve as a stepping stone towards a potential Free Trade Agreement (FTA), he acknowledges the US Congress's reluctance towards FTAs with any nation.
Transforming the MoU into a partnership agreement would elevate its status to a trade deal, potentially granting Indian companies access to the EV tax credit stipulated under the US Inflation Reduction Act (IRA). This legislation, aimed at bolstering manufacturing capabilities, currently extends its benefits to American companies or those from countries with existing trade pacts with the US. India's pursuit of a critical minerals partnership with the US mirrors the US-Japan agreement signed last year, which has granted Japanese companies significant duty concessions and other advantages in selling products within the American market.
Beyond the critical minerals partnership, discussions between India and the US have encompassed technology transfer, Green Hydrogen, Green Ammonia, and bio-sciences. Notably, Goyal observed a strong interest among American industries in investing across various sectors in India, with one company expressing plans to invest over $10 billion in data centers and quantum computing for AI. To further entice investment, India is strategically planning to establish investment offices in New York and Silicon Valley, staffed by representatives from Invest India and the National Industrial Corridor Development Corporation (NICDC).
This proposed partnership signifies a pivotal moment in the US-India economic relationship, reflecting a shared commitment to clean energy technologies and sustainable growth. It underscores the growing importance of critical minerals in the global economy, especially in the context of the transition towards cleaner energy sources. The potential benefits for Indian companies, including access to the lucrative American EV market, could stimulate significant economic growth and technological advancements within India.