India: A US partner for global opportunity

May 13, 2010
The Hill
By Ron Somers

India is booming. A recent visit to this billion-person economy reveals stunning opportunities for U.S. companies.

In part, this can attributed to the U.S.-India Civil Nuclear Cooperation Initiative bearing fruit. This agreement, overwhelmingly passed by Congress in 2008, means job creation for both countries: In the United States, as it digs out from a crushing recession, and in India, as it attempts to employ three-quarters of a billion people younger than 35.

India is meeting this demand by continuing to strengthen its commercial ties with U.S. businesses. The country recently purchased $6 billion in Boeing aircraft. This will create thousands of American jobs at a time when they are so desperately needed. Moreover, this procurement attracts an offset obligation in India, which means U.S. suppliers will be enlisting American and Indian vendors and subcontractors to manufacture some of this order on India soil.

This is just a preview of what is to come as part of India's defense and counter-terrorism purchases that will amount to more than $50 billion during the next five years. These are not just "one-off" sales of American equipment. Rather, these sales amount to the transfer of technologies and "platforms" that will shape the defense and security relationship between the United States and India for the next two generations. U.S. businesses and workers welcome such job creating opportunities. But there is more than defense contracts that bind our relationship.

For instance, just last month India's Planning Commission announced $1 trillion worth of new ports, airports, interstate highways, electric power stations, and transport hubs that are needed in India by 2015. As the price tag for this infrastructure will exceed India's budget, the balance of the financing will come from financial institutions. This creates a major upside for American banks, insurance companies and pension funds, not to mention the construction companies, the equipment suppliers, and the U.S engineering firms sought after by India to implement these projects.

In the agricultural sector, India remains the world's largest producer of milk and the second largest producer of fruit and vegetables. Yet nearly half of the country's harvest spoils before reaching market due to poor infrastructure and inefficiencies in the farm-to-market supply chain. These gaps need to be filled and India has taken proactive steps to invite 100 percent foreign direct investment into its food processing and water management industries – creating a wide scope for U.S. industry collaboration.

Manufacturing is also flourishing in India – not to flood our markets with exports, but to provide for India's massive, internal consumption. This presents a major outlet for American collaboration. Ford is doubling its production line in Chennai and General Motors is doing the same in Gujarat. Considering that vehicle penetration in India is only nine cars per every thousand people — versus 750 per 1000 in developed economies — the country's manufacturing boom is only just beginning.

These positive trends will empower India's emerging middle class that is already 300 million strong. As this group continues to grow — it is already larger than the entire population of the United States — a sure bet is that India will be a market for American goods and services for decades to come.

The list goes on and the opportunities are many. However, this is not to say that everything in India is perfect.

Legislation pending in New Delhi would limit liability in the event of a civil nuclear accident. American companies are hopeful this legislation is consistent with the Convention on Supplementary Compensation (CSC); otherwise, the legislation will be a deal-killer for any publicly traded, private company – whether American or Indian.

U.S. firms would welcome an increase in foreign direct investment caps in the insurance and defense sectors, as well as the opening of the Indian retail sector. Similarly, for more than a decade, U.S. companies have been pressing India to allow the establishment of U.S. law firms on their soil.

Moves by India to harden protections of intellectual property are commendable, yet more needs to be done. Right now, a film produced in Bollywood is often seen in Dubai before premiering in Mumbai. To get this right, even-handed application of intellectual property protection and enforcement of piracy laws must be vastly improved.

As our economy emerges from a devastating global recession, how fortunate it is that India is a vigorous trading partner. The Indian consumer values state-of-the-art technology and is likely to buy American-made goods and services before all others.

A true partner with the United States in every sense of the word, India is a nation comprised of a free people who look forward to a bright future – imbued with hope and determination, and a vision that will shape the destiny of the 21st century.

Mr. Somers is president of the U.S. India Business Council, the premier business advocacy organization representing top-tier American and Indian companies, hosted under the aegis of the U.S. Chamber of Commerce.