International Trade Special Section | Emerging Market
A Largely Untapped Market
India could represent 1.3 billion new customers
By Alex Salov
Alex Salov is the business operations manager of World Trade Center Anchorage and has been working at the center since 2004; he holds a master’s degree in global supply chain management from the University of Alaska Anchorage.

hat comes to mind when someone hears the word “India”? A large country located very far from Alaska. A very populous country home to millions of poor farm workers. At the same time, India also home to millions of highly skilled IT professionals. Many college students encounter professors from India who teach a spread of subjects at major American universities. And last but not least, the Taj Mahal is a major travel destination for many Western tourists. The above statements paint a multifaceted image of India.

But what about India/Alaska relations? The current trade between India and Alaska is very low: India is Alaska’s 48th trading partner with $769,000 in exports (placed between Israel, 47th, and Romania, 49th). Current trade commodities include chemicals, electrical and transportation equipment, and waste and scrap. However, there are many opportunities for this trade to grow, and Alaska’s business and government leaders need to take a closer look at India and learn more about this potential new partner for Alaska.

India’s Socioeconomic State
India’s landmass is about one third of the US territory, but it has three times more population than the United States—1.3 billion people, approximately one fifth of the world’s population. By 2024, India is on track to become the world’s most populous nation, surpassing China. One-third of India’s population is below the age of eighteen, and the median age is twenty-seven. A similar trend was true about China several decades ago; however, today the median age in China is thirty-eight years old. Nearly 70 percent of Indians live in rural areas, but this number decreases every year.

The country has twenty-two official languages, many religions, and is the world’s second largest English-speaking country (125 million people) just behind the US. India is a parliamentary democratic republic and it attained independence from Great Britain in 1947.

Currently, India is the fastest growing economy in the world with 7.4 percent of GDP growth projected for 2018.
Today India consists of twenty-nine states and seven union territories. India’s strong political system is an important factor for potential foreign investors—in 2016 it was the world’s top investment destination. Another factor that is often mentioned in India-related articles is that India has one of the world’s most extreme income inequality levels: more than 100 billionaires and 245,000 millionaires live side-by-side with hundreds of millions of low income people. Approximately 70 million of those are living in “extreme poverty,” surviving on less than US $2 per day. It is estimated that the richest 10 percent of Indians own more than 80 percent of country’s wealth. According to some economists, India’s “extreme poverty” is declining and will come to an end by the middle of the 21st century; however, there is no doubt that a very large group of the Indian population will continue to live in poverty.

India shares similar economic growth characteristics with developing countries in Southeast Asia. Currently, it is the fastest growing economy in the world with 7.4 percent of GDP growth projected for 2018 (compared to 6.6 percent in China and 3.1 percent in the United States). India has 1.16 billion wireless subscribers (86 percent of the whole population). This is a trend in developing countries, where people have access to mobile phones without access to common infrastructure such as roads or even electricity.

Energy Infrastructure Needed
Very often, mobile phones are the sole source of communication, information, and entertainment. As the middle class in India grows and urbanization continues, adequate infrastructure needs are currently not met and are immense. In an effort to cope with this problem, the Indian government has ambitious plans to electrify 40 million households that today don’t have access to electricity. To do so, the government is focused on growing the infrastructure of new power plants, roads, LNG terminals, pipelines, and offshore gas development terminals. Currently, coal is the largest source of electric power in India (80 percent of all the electricity is produced with coal). As the old adage says, “coal is still king.”
In the 21st century India is poised to surpass China in both population and GDP.
India is the world’s second largest coal importer by volume after China, and the main coal suppliers to India are Australia, Indonesia, South Africa, and the United States. In 2017-2018 India was the largest importer of American coal. Potentially, coal development and coal exports can become big business for Alaska with regard to trade with India.

India currently imports more than 80 percent of its oil, plans to cut its reliance on foreign energy, and will offer international investors $300 billion dollars in investment opportunities in the energy sector. Currently, there are four operating LNG receiving terminals with eleven more planned or under development. The new LNG plants are positioned to increase overall LNG share in the energy mix to 15 percent (currently at 6 percent). India is the fourth largest LNG importer in the world and currently imports the gas from Qatar, Russia, Australia, and the United States. If a gas pipeline project in Alaska gets underway, India could potentially be a new and significant customer for Alaska LNG.

China vs. India
There is a tendency to compare India to China as they are the world’s most populous and rapidly developing countries. While China has positioned itself as the “mover and shaker” of the world, India’s growth is comparatively quiet. However, in the 21st century India is poised to surpass China in both population and GDP. It has been forecasted that in 2018-2019 India’s economy is going to surpass France and the UK (currently, world’s 5th and 6th largest GDPs, respectively) to become the world’s 5th largest GDP after the United States, China, Japan, and Germany.

Indian and Chinese economies are mirror opposites if compared in terms of their main export commodities. While China is the world’s largest manufacturer and exporter of manufactured goods, its service sector is largely focused on the internal market. For India, on the other hand, it is estimated that 37 percent of total exports in 2017 accounted for the services exports (software and IT services, followed by business, transportation, financial, insurance, and other services), and this percentage continues to grow. Indian manufacturing is currently focused on the internal market, but this trend can change as the country develops. One of the reasons for the high demand for India’s service sector around the world is, of course, the advanced education level of the service industry’s human capital. Also, one of the major factors that adds to the success of the Indian service sector is the ability of its employees to communicate in English (the international language of the IT and finance sectors).

An important factor that influences relations between the United States and India are the 3.3 million Americans that are of Indian origin who are employed in various business and government sectors and support the development of United States/India relations. According to the India First Group, a US-based strategic consulting firm, the interaction between India and the United States is“ extraordinary,” including government and military dialogues, business activities, and people exchanges, and “there is more going on between India and the United States than with any other country.”

Stumbling and Building Blocks
So what are the obstacles to doing business in India? From Alaska’s standpoint these include distance and the absence of direct transportation routes between Alaska and India. The US Department of Commerce considers India to be a difficult market for outsiders because of the bureaucracy and corruption. That said, Alaska companies can offer many building blocks to address India’s infrastructure needs, including natural resources, technologies, and services. The Indian middle class is growing, and its demand for high-quality products that Alaska can offer is also growing. One more thing to consider about India is the size of its market. Just like in China, working with a local distributor in India can be more than enough for an Alaska business to fully utilize their products or services.

World Trade Center Anchorage led the first ever business trade mission from Alaska to India in 2010. Several Alaska economic sectors—including infrastructure development and energy—were represented, along with several state government officials. A number of meetings were held for the Alaskan delegation in New Delhi, including meetings with several Indian ministries and energy companies. The interest for bilateral commercial relations exists and a next step may be an inbound trade delegation visit of Indian leaders to Alaska to research economic opportunities. In spring 2019, World Trade Center Anchorage will conduct the second Alaska-India Business Conference during which commercial dialogue can continue and Indian officials will be able to meet their Alaskan counterparts and possibly connect with them with regard to the new business opportunities. This will be an important opportunity for Alaskans to understand India’s import needs and for Indians to evaluate Alaska’s export capabilities.