Global Economics

India Can Give the U.S. a Big Export Boost


Obama's visit will highlight opportunities for U.S. businesses to export to India, columnist Gunjan Bagla writes

On Nov. 5, Air Force One will take off for Mumbai with President Barack Obama, First Lady Michelle Obama, and a retinue of top officials at about the same time Indians are celebrating their most important holiday, Diwali. In a testament to India's ability to accommodate guests at any time, the delegation will descend on the country's financial capital on the day that many traditional Indian businesses begin their fiscal new year. You have to give the proposed trip an A-plus for symbolism. The President will spend more time in India than in any other foreign country since he took office. The First Lady will accompany the President, even though daughters Sasha and Malia are at school. (Michelle Obama won't travel with her husband to the G-20 summit following the India trip.) Obama will stay at the Taj Mahal Hotel, the target of deadly attacks on Thanksgiving weekend in 2008. Obama admires India's independence leader Mahatma Gandhi, whose nonviolent resistance teachings influenced Martin Luther King; the President will visit the Gandhi Museum in Mumbai and lay a wreath two days later at the Raj Ghat memorial to the Mahatma in New Delhi. Symbolism by itself creates neither peace nor prosperity, so let's examine substantive issues in which progress might benefit citizens of both countries. Ben Rhodes, Obama's deputy national security adviser for strategic communications, has echoed my comments in Businessweek.com on the importance of India as an export market for U.S. business. Speaking to reporters in Washington on Oct. 27, Rhodes said "India is fundamental" to the National Export Initiative, which seeks to double exports from $1 trillion to $2 trillion in five years. The initiative would generate two million new jobs and Obama's team hopes India will be a significant contributor. Big Military Export Prospects

In the same White House briefing, Mike Froman, Obama's Advisor for International Economic Affairs, pointed out that U.S. exports of goods to India have quadrupled in the last seven years and services exports have tripled. American architects have designed some of Mumbai's most iconic buildings, such as billionaire Mukesh Ambani's home and the upcoming tallest office building in the city. U.S. engineers helped design the Jamngar refinery on the coast of Gujarat and U.S. companies participated in modernizing the Mumbai airport. India is on the verge of placing an order for 10 Boeing (BA) C-17 Globemaster military transport aircraft and is increasing its $2.1 billion order for P-8i Poseidon naval surveillance aircraft by 50 percent. A stream of top U.S. defense contractors is starting to submit quotations and information packets to India's Ministry of Defense. While Russia remains India's top supplier, U.S. companies have an unprecedented opportunity to win tens of billions of dollars of new orders for defense products they are forbidden to ship to China. If Obama's trip can serve to loosen America's own outdated export-control regime, companies such as Raytheon (RTN), General Dynamics (GD), L-3 Communications (LLL), Northrop Grumman (NOC), and ITT (ITT) can start to participate fully in India's ambitious defense-modernization plans. Most imminently, two U.S. players are competing against Russian and French rivals for the $10.5 billion medium multi-role aircraft (MMRCA) order.

As if to underscore the importance of Obama's trip, on Oct. 27 India signed the Convention on Supplemental Compensation (CSC), a key international standard encouraged by the U.S. to enable consistent global processes in the event of a civil nuclear accident. In the wake of the nuclear agreement signed by the U.S. and India in 2008, this is one of the final steps to enable U.S.-based companies such as GE-Hitachi Nuclear Energy and Westinghouse Nuclear to begin bidding on India's expansion of uranium-based electrical capacity, which will grow from 4,000 megawatts to 30,000 Mw over the next 20 years. General Awakening to India's Market?

Barriers remain. India continues to limit foreign direct investment in sectors such as insurance, media, defense production, and retailing. Large U.S. companies would love to see Obama pressure Prime Minister Manmohan Singh to ease these limits so that, for example, Wal-Mart (WMT) can hang its retail banner in India, New York Life can function without joint-venture partners, and Boeing can own a aircraft fabrication shop. There is a bigger barrier that the Obama trip could eradicate. Thousands of U.S. companies have not looked beyond China and Europe to India. In part, this is because of distance and complexity. I think, though, that decades of media portrayal of India as a poor country known mostly for famines, floods, and wars with its neighbors have left little enthusiasm among many Americans to consider India seriously. In my public speaking, I often find otherwise sophisticated executives surprised that India is a $1 trillion dollar economy that has produced 25 billionaires. They are not aware that India's satellites have explored the Moon and that the world's largest metal forging facility is located not in Germany or China, but in India. They don't know that the Pew Center reported that 66 percent of Indians feel positively about the U.S. (compared to 51 percent who rate Russia positively and only 36 percent who feel good about the European Union). The fanfare around the Obama visit could awaken U.S. companies to the possibilities that India's market offers. My company is a member of the U.S.-India Business Council, which includes some of the largest American corporations. Leaders such as Terry McGraw of McGraw Hill (MHP), Indra Nooyi of PepsiCo (PEP), David Cote of Honeywell International (HON), Louis Chenevert of United Technologies (UTX), and Ellen Kullman of DuPont (DD) are expected to be in India during the Obama visit. These companies already know and taste the potential of India. Thousands of others may be awakened by the publicity of a Presidential visit. American Culture Holds Broad Appeal

As Froman pointed out in the White House briefing, Indian companies are the second-fastest-growing investors in the U.S. They now create or sustain 57,000 American jobs. When Indian companies invest in the U.S., they are not met with the kind of popular hostility sometimes meted out to Dubai- or China-based investors. Reliance Industries (RIL:IN) has made two major investments this year in shale gas projects in the U.S. During Obama's trip the two governments may sign an agreement facilitating technical collaboration as India seeks to explore its own reserves of shale gas. India will never be an easy place for Americans to do business. It will never glide into the U.S. orbit and it will continue to assert its independence. Shortly after visiting Washington in September, Indian Defense Minister A.K. Antony announced progress on two new partnerships with Russia. Russian and French leaders are to visit India shortly after Obama leaves and India will want to offer them something to make it worth their time. Still, the allure of the American way of life and the accessibility of everyday Americans is appreciated by India. This why 100,000 Indian students choose to study in the U.S. This is why many upper-middle-class Indian families have at least one close relative who lives in the U.S. Some Indians are hopeful that Obama will announce support for India's permanent membership in the United Nations Security Council. Some Americans are hopeful that Obama will convince the Indians to allow Wal-Mart and Best Buy (BBY) to operate freely in India. My hope is that someone will start talking about a U.S.-India Free Trade Agreement. (India is in discussions with the European Union about such an understanding.) I would be delighted if Obama removed several Indian organizations from the U.S. Commerce Dept.'s Entity List, which makes it practically impossible for them to collaborate with their American counterparts; these include the Indian Space Research Organization's Vikram Sarabhai Space Center, the Defense Research and Development Organization, and the Bhabha Atomic Research Center. Even if none of these goals are achieved by Nov. 9, the Obama trip will be a success if it captures the minds of U.S. executives and leads more of them to engage with India.


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