Strategic Engagement with India

Robert O. Blake, Jr.
Assistant Secretary, Bureau of South and Central Asian Affairs
Baltimore Council on Foreign Affairs
Washington, DC
October 13, 2010

I’m pleased and honored to address the Baltimore Council on Foreign Affairs. Organizations such as yours that are dedicated to educating the community about foreign affairs play such an important role.

I’m particularly glad to have the opportunity to provide remarks about relations between the United States and India a few short weeks before the President visits India in early November. Thank you to Dr. Frank Burd for making this happen.

I understand that Indian Ambassador Meera Shankar spoke here last month, and also talked about the strategic partnership. I don’t want to cover the same ground, but when I read the speech, I noticed that she had used all my talking points!
Ladies and gentlemen:

India is the world’s largest democracy, one of the world’s fastest growing economies, and a rising power in Asia and beyond. It has vibrant democratic institutions, a free press, a robust civil society, and an innovative private sector.

India's commitment to the values cherished by their people and espoused by their founders – democracy, pluralism, tolerance, openness, and respect for fundamental freedoms and human rights – animate our continued efforts to build a more peaceful, prosperous, inclusive, secure, and sustainable world.

These common values and our increasingly convergent interests have driven an unprecedented transformation in Indo-US relations in just one decade.

After the Cold War, President Bill Clinton seized upon India’s rapid economic emergence and liberalization to lay the foundation for this transformation through his iconic five-day trip to India in the year 2000.

The Bush Administration built upon the Clinton legacy, with the U.S.-India Civil Nuclear Deal – a landmark achievement for both of our countries. Today, the wide scope and the intensity of our bilateral engagement is unprecedented and yet still growing.
President Obama had called India our “indispensable” partner for the 21st century. That’s why the President and Secretary Clinton are now forging a new strategic partnership with India that will help shape the 21st century.

India’s strategic importance to the United States reflects several factors:
· 1/3 more of our trade is now with Asia than Europe.
· India soon will be the world’s most populous country.
· And India is a young country. At a time when much of the industrialized world faces rapidly declining birthrates, half of India’s population is under age 25.
· It is the world’s second fastest growing economy today and is projected to become the world’s third largest economy in the year 2025.
· In remarking on the implications of India’s growth for US business, Larry Summers told the US-India Business Council earlier this year that the India of 2040 may well be a nation of “over a billion people in middle-class living standards.”
· Finally, within Asia no other country has the thriving democracy, economic promise, and the growing record of cooperation with the United States than India has.

Under Secretary of State William Burns summed up the opportunity before us in a recent speech:

“Never had there been a moment when India and America mattered more to one another. And never has there been a moment when partnership between India and America mattered more to the rest of the globe.

As two of the world’s leading democracies, we can help build a new global commons – an international system in which other democracies can flourish, human dignity is advanced, poverty is reduced, trade is expanded, our environment is preserved, violent extremists are marginalized, the spread of weapons of mass destruction is curbed, and new frontiers in science and technology are explore. That is the moment, and the promise, that lies before us.”
That is why President Obama hosted Prime Minister Singh to the White House last year for the first State Visit of his Administration, when he called the U.S.-India relationship “one of the defining partnerships of the 21st century.”

As part of the effort to give more definition to the partnership, President Obama and Secretary Clinton established a Strategic Dialogue last year, which convened for the first time in June in Washington.

The purpose of the Dialogue is to give senior-level strategic direction to the many working groups and dialogues already in progress, and to conceive new initiatives that will further propel our countries towards prosperity.

The Dialogue already has cemented closer cooperation on education, agriculture, clean energy, counter-terrorism, space exploration, food assistance, and other activities.
In a few weeks, in early November, President Obama will make a three-day visit to India that will mark another seminal milestone in our bilateral relations.

I know that what you’d like is a detailed preview of the visit, which will mark his longest stay anywhere outside the U.S. But I don’t want to scoop the President, and since we’re still in the planning stages for a large number of big-ticket items, I don’t want to jump the gun.
But I can give you the broad outline of how we envision the visit will frame the strong U.S.-India partnership, and how specifically this holds great benefits for Americans.
As we work with our Indian friends to plan for the President’s visit, I’d like to address the three cross-cutting themes will illustrate the breadth, depth and promise of our partnership.
First, the visit will illustrate how India’s economic rise has created new opportunities for mutually beneficial economic partnerships between our two knowledge-based economies.
Thinking about the emergence of developing powers – be they India, China, Brazil or even Turkey – tends to focus on how the growth of these nations could adversely affect economic conditions here in the United States. But a recent study by India’s Federation of Indian Chambers of Commerce and Industry showed that Indian firms are investing almost as much here in the U.S. as their American counterparts are in India.

During 2004-2009, 90 Indian companies made 127 greenfield investments worth $5.5 billion, and created over 16,000 jobs in the United States. During that same period, 239 Indian companies made 372 acquisitions in the United States.

For those deals for which we know the worth, the total value was $21 billion, or $78.7 million per acquisition. And for only 85 transactions for which the study could find the information, Indian acquisitions saved or created over 40,000 jobs.
In fact, a new poll conducted by the Chicago Council on Global Affairs, however, shows that

Americans have an increasingly favorable view of India, and Americans increasingly favor a free trade agreement with India, a figure that has risen 9% points in just 4 years.
As further proof of the benefits we get from greater U.S.-India trade, Mukesh Ambani – owner of the behemoth Indian company Reliance Industries – told the press that he expects to create thousands of U.S. jobs and infuse enormous amounts of capital to explore for and develop shale gas here in the United States. No longer are U.S.-India business ties a “one way street.”
The State of Maryland has a growing stake in the US-India partnership.

Take trade. Maryland’s state government was so bullish about trade and investment opportunities with India that it opened a Maryland International Business Center in Delhi in 2009 to attract Indian businesses to the state and help promote exports. Governor O’Malley has also presided over annual India-Maryland Business gatherings held for the past few years.

One particularly attractive area for Maryland business collaboration is high technology. Last year, high-tech products accounted for more than 13 percent of total trade between the US and India and nearly 25 percent of all U.S. exports to India. Bio-technology, bio-pharmaceuticals, medical devices and life sciences are an increasingly large component of this high-tech trade.

According to the recently released "Vision 2020," a report produced by PriceWaterhouseCoopers at the request of India's Department of Industrial Policy and Promotion, the global bio-pharmaceutical market could be worth $319 billion by 2020. The report suggests India aims to capture 10 percent of this market.

The United States and Indian governments are now working to lay the groundwork for increased regulatory harmonization and collaboration that will permit our bio-tech industries to flourish. Of course, the clinical research industry will play a vital role in this anticipated growth – and few states are better positioned than Maryland to take advantage of this knowledge-based market.

As a hub of biotech, with the J. Craig Ventner Institute, Johns Hopkins and National Institute of Health located in the state, Maryland’s many small biotech firms have much to gain and offer in forming collaborations with India’s equally innovative biotech sector. India has contributed substantially to the Human Genome Project, and is one of eight countries participating in the International Rice Genome Project, which aims to map out the genetic structure of rice.

These collaborations have the potential to contribute not only jobs, and but can help secure food availability and prevent epidemics. As an example of what is possible, I will point to one case in the state of Indiana.

One of India’s leading drug discovery and development companies, Jubilant Life Science Ltd., has become an important player in that state’s economic development. About 100 of Jubilant’s 2,300 employees work at its Indianapolis office.

The company, which has annual revenues of around $250 million, collaborates with U.S. companies such as Eli Lilly in the “BioCrossroads” public/private initiative to promote life sciences and biotechnology in cooperation with the Indiana state government.
Between 2001 and 2007, payroll employment in Indiana life sciences industries grew by nearly 3 percent a year, while employment across all Indiana manufacturing shrank by about 2 percent each year.

Life sciences represented nearly a quarter of all job growth in Indiana during this period. As a result of the work of companies like Jubilant, Indiana is now home to more than 1,600 businesses in the medical device, pharmaceutical, drug development, diagnostic, and the ag-biotech sectors. The annual wage of a typical life sciences job in Indiana is $82,000, which is more than double the state average. Maryland too offers a natural ecosystem for this kind of economic development.

Second, our education and agricultural collaboration will draw on resources in both countries to help sustain inclusive growth in India and the continued rise of India’s poor into the middle-class, enlarging a market that benefits the world economy, and especially the U.S.
McKinsey has predicted that India could have as many as 91 million middle class urban households in 2030, up from 22 million today. Each of these families will want a TV, internet service, washer and dryer, chapatti maker, and anything that you or I have in or homes (not that I have a chappati maker), and the global economy, and especially the U.S. is set to produce and sell the goods and services for this growing middle class.

As a reflection of the middle-class growth in India, Bethesda-based Marriott has plans to nearly quadruple the number of hotels it operates in India. This is not just in response to the demand created by foreign tourists, which the Investment Commission of India expects to increase to 10 million per year, but also domestic tourism by Indians themselves.

Another linkage between India’s middle-class and Baltimore: the McCormick spice company, based here, bought a $35 million 26-percent stake in the Indian spice maker Eastern Condiments. I’m sure that the 25 percent annual sales growth helped attract McCormick’s interest, a direct outcome of a skyrocketing number of middle-class consumers who purchase their spices at the supermarket, and not the spice bazaar.
To accommodate the growth middle class in India’s cities, the U.S. will play a huge role in investing the $1.2 trillion needed to pave roads, build subways, and erect infrastructure.
India Globalization Capital, a firm based in Bethesda, has already set out to compete in the rapidly growing Indian infrastructure market by setting up firms in Kerala, Nagpur and Bangalore. It’s the only Indian infrastructure firm to be listed on the U.S. stock exchange.
Being here in Baltimore today, a center of many excellent educational institutes, it is important to acknowledge the symbiosis between education and the growth of the middle class.
A strong education system in both the United States and India is at the crux of each nation’s knowledge-based economy, and will fuel innovation and facilitate growth for decades to come.
Nandan Nilekani, the legendary founder of information technology giant Infosys has estimated that while the working-age population of other major economies will be falling over the next decade, India will have an additional 47 million workers in 2020, almost equal to the shortfall in the world’s other large economies.

These legions of Indians entering the workforce for the first time represent an immense economic opportunity for India and its partners—but only if they receive the education and training they will need to compete in India’s globalizing economy.

India’s dynamic Minister of Human Resources Development Kapil Sibal recently told an audience in New York that India now has 220 million young people enrolled in primary and secondary education, only 14 million of whom will have the opportunity to attend college.
Sibal wants to quadruple that figure so 60 million young Indians can attend colleges in coming years. He estimates India will need 50,000 new colleges and universities starting through public-private partnerships. And with 150 million young people not in college, Mr. Sibal wants an extensive network of vocational and trade schools to train Indian young people in a wide range of fields to drive India’s fast-growing economy.

Minister Sibal and his colleagues know India cannot meet these challenges alone. That is why later this year or early next, hopes to shepherd a bill through India’s Parliament that for the first time will allow foreign universities to establish campuses and offer degrees in India. This will open significant new opportunities for American universities to develop new partnerships, and new research and development opportunities with Indian counterparts.

But we’re not waiting for new legislation. The State Department is supporting a new partnership between Montgomery College and 3 Indian polytechnics and vocational education institutions where best practices are shared. We have a lot to share on how to build closer ties between schools and local businesses.

The State Department has also launched a new Community College Initiative Program for Indian students to earn one-year certificates in key fields at US community colleges; the first cohort of 48 students arrived in the U.S. this fall.

President Obama’s visit also will underscore the importance we attach to India’s growing leadership in Asia and beyond, and how our partnership will help build global security and prosperity.
As currently scheduled, the President begins his trip in India, and continues on to Indonesia, South Korea and Japan, thus situating India in the greater Asia region.

Ambassador Shankar discussed how we have set out to consult with India more widely about our strategies in South Asia and the Asia Pacific region, as well as on topics of global importance, such as nonproliferation, counter-terrorism and food security.

We will see India emerge as a global leader as it occupies a non-permanent seat on the UN Security Council from 2011-2013. We look forward to working with India on critical global issues such as thwarting Iran’s nuclear weapons program, fighting piracy in the Indian Ocean and Arabian Sea, and reinforcing human rights around the world. We won’t agree on everything, but our common values will ensure that our policies increasingly mirror each other.

The rise of India’s civilian power on the global stage will complement our own efforts at rationalizing foreign policy and emphasizing U.S. civilian power overseas.
In an effort to align resources, policies and strategies, Secretary Clinton launched last year the Quadrennial Diplomacy and Development Review, known as the QDDR.

The QDDR will release its first report soon, and will stress the importance of matching traditional diplomacy with innovative engagement that leverages resources, reaches beyond the U.S. government, and uses development strategically.

India’s broadening influence will reinforce the importance of civilian power. As one example, we hope to partner with India on women’s empowerment and agricultural capacity building activities in third countries, a remarkable display of using civilian expertise in our two countries for the betterment of a third. In this way, India’s formidable civilian force will help us rise to the challenges of the 21st century.

India also has a military side, and we plan to continue a broad array of defense cooperation. The U.S. has put forward both Boeing’s F/A-18 and Bethesda-based Lockheed Martin’s F-16 to compete for the $10 billion tender for the medium multi-role combat aircraft.
If either jet wins, we estimate that it could bring 27,000 jobs to the U.S. Equally important, it will help seal our strategic objective of working wing-to-wing with India to bolster global security and stability.

All of these ties demonstrate that cooperation between the United States and India now touches virtually every field of human endeavor and increasingly is informed and driven by the dynamic businesspeople, scientists, educators, and civil society who drive change in our countries and bring our people closer together.

It is these enduring people-to-people ties, from the 100,000 Indian students here in the U.S. to the 2.5 million Indian Americans here in the U.S. that will help our two governments to strengthen further our strategic partnership in the years ahead.
Thanks again to the Baltimore Council of Foreign Affairs for providing this valuable opportunity. I would be pleased to take a few questions.