Insight October 1, 2010, 10:31AM EST

India Can Help Obama Reach Export Goal

With President Obama aiming to double exports in five years, U.S. executives need to focus on the Indian market's untapped potential, writes columnist Gunjan Bagla

Story Tools

(Corrects name of aircraft and dollar-value of order in 12th paragraph.)

Earlier this year, President Barack Obama announced the National Export Initiative, his Administration's ambitious plan to double U.S. exports in five years. It's a bold target: The last time U.S. exports doubled in five years was 1981-1986, when Ronald Reagan was President—and Japan, not China, was the economy Americans feared most.

Obama's effort includes expanding export credits from $4 billion to $6 billion, encouraging midsized companies to look overseas, and assailing import barriers and unfair subsidies in other countries. To boost exports from 2009's $1 trillion level, Obama is increasing the budget of the Commerce Dept.'s International Trade Administration (ITA) by 20 percent, to $534 million, and will hire an additional 300 ITA staffers next year to serve as international trade specialists at home and abroad.

Where are U.S. companies to find a further trillion dollars of annual export revenue? Most of the world is trying to increase exports, too. We can't all export our way out of the current funk. And some of the European Union's mature markets don't offer prospects for much incremental growth at this time.

There is still room for U.S. exports to grow, though. My colleagues and I analyzed the numbers and think that almost half the targeted increase in U.S. outbound trade can come from just five countries whose domestic markets are growing fast, or whose proximity, familiarity, and free trade commitment will enable new companies to gain market share. Those countries are China, India, Brazil, Canada, and Mexico. U.S. exports to them totaled $445 billion last year and we expect the number to more than double, to $925 billion, by 2014.

world's fourth-wealthiest economy

Let's face it: Actual exporting has to be accomplished by corporations, not by the government. Hands-on experience in recent years has led me to conclude that U.S. corporate executives generally lag in paying attention to potential exports to India.

Having crossed the trillion-dollar mark in 2007, the Indian economy is the world's fourth-wealthiest—based on purchasing power parity—after the U.S., Japan, and China. Its growth rate has never dipped below 5.8 percent in recent years, even during the worst of the global economic crisis.

India's own statistics, which don't fully account for its vast, undocumented economy, show a growth rate of over 8 percent this year. Many believe that the country will keep growing at close to 10 percent in the next decade, barring unforeseen disasters. Growth in India is driven by domestic factors and is not hostage to exports. The Indian government has helped by lowering duty barriers and overhauling direct and indirect tax codes; moreover, the government recognizes the need for foreign technology, products, and services to keep up the growth rate.

U.S. executives scanning the globe for low-hanging fruit should note India's remarkable untapped potential. When the Washington-based Pew Research Center conducted its most recent Global Attitudes Survey, it asked: "Do you have a favorable or unfavorable view of the U.S.?" Some 76 percent of Indian citizens responded affirmatively. By contrast only 47 percent of Chinese and 44 percent of Russians thought positively of the U.S. A year earlier, the market research firm Ipsos reported similar results.

how to convert good will to revenue?

Americans are better-liked in India than almost anywhere else in the world. Particularly when compared with attitudes in China and Russia, U.S. brands, celebrities, and culture are well appreciated in India. Unlike China, India does not limit American movies and media and India does not censor or limit foreign Web companies such as Google (GOOG).

Yet in my experience there is a gap in the minds of U.S. executives when it comes to converting this surplus of good will into revenue. Let's look at some examples of how India's market is quickly changing.