West Bengal and Beyond: U.S.-India Business Links and Prospects for the Future

Robert O. Blake, Jr.
Assistant Secretary, Bureau of South and Central Asian Affairs
Kolkata, India
June 17, 2011

(As prepared)


Thank you, Beth, and thanks also to Deputy Chairman Agrawal and Mr. Budhia for your warm welcome. It is a distinct pleasure to speak to the Confederation of India Industry, especially here in Kolkata, one of the great cities of the world. Although I visited many times when I served as the Deputy Chief of Mission at our Embassy in New Delhi, this is my first visit as Assistant Secretary. This city, which hosts one of our oldest consulates, provides a glorious amalgam of history and modernity. Kolkata radiates a uniquely pan-Asian experience. Few places enliven the senses more than this fantastic global hub. I am truly pleased to be with you today.

One thing that is so extraordinary about this city and West Bengal in general is its diversity. There are of course many well-known Calcuttans who’ve made an indelible mark on humanity, from the great Nobel Prize-winning economist and ethicist Amartya Sen, to the Oscar-winning Satyajit Ray, to the prize-winning writer Amitav Ghosh, and of course the humanitarian and Nobel laureate Mother Theresa. And just last month, millions of people from all over the globe celebrated the 150th anniversary of the birth of one of the great writers, intellectuals, and humanists that has ever lived, the Bengali son Rabindranath Tagore. As the first Asian Nobel Laureate, Tagore was an intellectual pioneer who brought people together through his prolific work and his inexhaustible travels to the far reaches of the globe. There must be something wonderful here that leads to so many Nobel prizes!

I’d also like to acknowledge the distinct entrepreneurial and business spirit that exists here. I’ve always been struck by the feeling that Calcutta is a city on the move, where the tremendous potential for growth will be realized by the next generation of young entrepreneurs who are seeking to shape the destiny of this city. The almost-completed, gleaming new airport, the many flyovers, and other impressive infrastructure projects here, reaffirms for me that Kolkata remains a global hub.

A U.S.-India Partnership for the Future

I have been privileged to help advance the US-India partnership since I first started working in India in 2003. I have seen first-hand how committed government leaders working hand-in-hand with the business community and buttressed by strong people-to-people ties can transform a bilateral relationship. Broad, bipartisan political support in both countries has driven our countries closer together over the last decade, and ensures that this relationship will continue to be a mainstay of American and Indian foreign policy, regardless of who is in power.

Over the last decade, beginning with President Clinton’s landmark visit in 2000, to the civil nuclear deal negotiated by the Bush Administration, to the greatly expanded strategic partnership established by President Obama and Prime Minister Singh, we have fundamentally transformed the way the United States and India work together. President Obama’s trip last November will be remembered as a watershed, when the U.S. and India embarked for the first time on concrete initiatives to work together globally. Reflecting the comprehensive nature of our bilateral engagement, the President’s visit resulted in new milestones across virtually every field of human endeavor, from civil nuclear cooperation to regional consultations, from energy to food security.

Transforming U.S.-India Business Ties

Of course, I don’t need to remind this audience that our business ties represent one of the most vibrant features of the U.S.-India partnership. In fact, many of you here today have played a key role in helping transform the economic relationship. And what a transformation it has been!

The Indian economy of today is the second fastest-growing in the world – expanding at a rate of over 8 percent annually. The Indian economy has produced some of the world’s leading multinational corporations, which create innovative goods and services, and present novel business models for the other countries.

However, as the Indian government itself acknowledges, growth presents its own challenges. How to manage growth in a way that includes the most vulnerable in society has been a top focus of the Indian government. In the private sector, businesses would like to be able to move faster. India has embarked upon a major period of infrastructure upgrades, which, once completed will vastly lower the transaction and time costs of doing business. Other challenges mentioned by Indian and other companies include corruption and lack of transparency. Indeed, India ranks 134 out of 183 countries in the World Bank’s index of “Ease of Doing Business.” I am confident that Indian business and policymakers together will overcome these challenges to unleash even greater growth to benefit all.

The future of India’s economy looks very bright—and very young. For example, India will likely have the world’s third largest economy in the year 2030 and the largest by 2050. India’s population will become the largest by 2030 as well. At a time when much of the industrialized world is shrinking as well as aging, half of India’s population is under age 25. That large and youthful work force is a growing strategic advantage, provided these young people can get the 21st century education they will need to compete. According to one study, India will have 25 percent of the world’s workforce by 2025.

The incredible growth of India’s economy has resulted in positive spillover effects for the United States. A quick look at the data reveals a trade relationship that is accelerating, mutually beneficial, and relatively balanced. Between 2002 and 2009, U.S. goods exports to India quadrupled, growing from $4.1 billion in 2002 to more than $16.4 billion in 2009, and U.S. services exports to India more than tripled, increasing from $3.2 billion in 2002 to more than $9.9 billion in 2009. U.S. exports to India have grown faster than exports to practically all other countries in the world.

2010 broke records for U.S.-India trade in goods with U.S. exports to India up 17% and U.S. imports from India up 40%. This surge of nearly 30% to a high of $48.8 billion in goods trade moved India up two notches to become our 12th largest goods trading partner. This positive trend continues, with two-way goods trade up 19% in the first quarter of 2011 over the same time period last year. Our trade with India is also very much a two-way exchange with mutual benefits to both our countries. Robust two-way trade means citizens from Kolkata to Kansas will see the benefits of our trade engagement.

India is also a growing source of foreign direct investment into the United States. The total stock of FDI from India to the United States stood at almost $5.5 billion at the end of 2009. It has grown at a compound annual growth rate of 35 percent during the 2004 to 2009 time period, making India the 7th fastest-growing source of investment in the United States. Indian companies invest heavily in many U.S. industries such as energy and information technology, and we expect their investments to increase.

The character of our trade with India is also relatively balanced. In a global economy where America’s trade relations in some cases have a balance favoring the other nation, the fact that India’s exports to the U.S. are relatively equal to its imports is important to note. Our trade with India also encompasses a broad range of sectors. U.S. exports to India include aircraft, electrical machinery, chemicals, plastics, pharmaceuticals, vehicles, railway equipment, and steel.

Services trade is also significant. In addition to the dynamic IT trade investment, tourism is a little known but growing service. Last year 650,000 Indians visited the U.S., an increase of 18%, making India the 10th ranking source of tourism to the U.S. So I urge you to do your part and visit the U.S.—all of our 50 states will be happy to welcome you!

We in government are absolutely committed to doing everything we can to open new opportunities for trade and investment. We have a variety of mechanisms for doing so. Finance Minister Mukherjee will visit Washington at the end of June to hold a round of the U.S.-India Economic and Financial Partnership with his counterpart Treasury Secretary Geithner. The High Technology Cooperation Group, which has enabled both governments to significantly reduce barriers to trade in sensitive, cutting-edge high technology, will meet in mid-July in New Delhi. Other ongoing forums include the U.S. Trade Representative’s Trade Policy Forum, which encompasses a number of sector-specific dialogues; and the Department of Commerce’s Commercial Dialogue, which facilitates an open dialogue about trade.

The Opportunity for U.S. Businesses

India’s market offers tremendous opportunity to U.S. exporters of goods and services. India has a market of 1.2 billion of the world’s consumers. These consumers have growing aspirations, and the disposable income to act on their aspirations. This is a powerful combination.

The limitless potential for e-commerce, social media, and endless other business ideas that will arise from enhanced connectivity is staggering. According to a recent Wall Street Journal article, the current internet penetration in India is in the range of only 80-100 million, less than 10 percent of the population. With the advent of 3G and the ability of more Indians to go online with their mobile phones, the world of internet access will be completely transformed. Imagine more than half a billion—and growing—people chatting, Tweeting, connecting and innovating from their phones!

Over the last few years of traveling in and out of India, I have seen first-hand how your infrastructure has grown to accommodate a burgeoning, more prosperous country, like the new airports that now welcome visitors at many of India’s largest cities. According to McKinsey Global Institute, 80 percent of the India of 2030 has yet to be built. U.S. companies want to provide the goods and services needed to upgrade and build India’s railroads, airports, power plants, and fiber optic cables. India will need to invest $143 billion in health care, $392 billion in transportation infrastructure, and $1.25 trillion in energy production by 2030 to support its rapidly expanding population. According to another McKinsey report, India’s Urban Awakening, in 2030, India will have 68 different cities housing one million plus people each. India will have to construct as much as 900 million square meters of commercial and residential space each year, to keep pace with demand. India must also pave 2.5 billion square meters of roads, and tunnel 4,600 miles of subways and metros.

Representing yet another significant opportunity, India’s military and civil aviation modernizations – priced at around $35 billion -- are already slated for some of the world’s largest purchases in the next decade. The Cabinet Committee on Security’s approval of the purchase of C-17s from the U.S. is just a sample of the sales that we expect will occur over the next several years.

A Knowledge-Based Partnership

The trade relationship in tangible goods has a solid foundation based on shared, intangible assets that power our strategic partnership: democratic values, entrepreneurial vigor, diverse societies, a strong and independent judiciary, and a passion for innovation. These are the key ingredients of a knowledge-based economy.

In an age where innovation, entrepreneurship and economic power are as important as military and political power—a sentiment articulated by Les Gelb last year in his Foreign Affairs essay, “GDP Now Matters More than Force”--America’s future will rest on the power of our knowledge, ideas, and economy. In this context, we see no better partner than India, and in India, West Bengal’s legacy as an academic and cultural fulcrum makes this state a pivotal part of our partnership.

American businesses see in India a vibrant laboratory for research and innovation that will produce tomorrow’s goods and services. The complex, multifaceted environment in India allows companies and entrepreneurs to test and validate multiple strategies and solutions. Increasingly, these solutions will be applicable not just to India or the U.S., but to the world at large. Kolkata’s historical position as a gateway of Asia will help disseminate those breakthroughs to Bangladesh and Southeast Asia.

The challenges of operating in India require adaptability and flexibility, which have led to new business models, including pay-as-you-go approaches, and selling consumer products in small sachets through a network of rural women entrepreneurs. The “bottom of the pyramid” insight is now accepted wisdom: it is possible to mobilize the power of the markets, in collaboration with NGOs and communities in need, to make a positive and sustainable difference in the lives of the poor.

The West Bengal Connection

I’d like to take this opportunity to highlight some of the ways that U.S.-India economic and business ties have been fostered, in a context unique to West Bengal. The United States and India already have a proud history of cooperation in agriculture. Indeed, India's Green Revolution stands as one of the greatest legacies of our bilateral relationship. Today, an excellent example of cooperation that is already successful here in West Bengal is PepsiCo's Frito-Lay food processing plant just outside of Kolkata.

When PepsiCo came to West Bengal in 2004, it introduced a partnership-farming concept, with an “assured buyback” program with local potato farmers along with extensive support with upgrading farm practices. Since then, the company’s initial group of 140 farmers has grown to more than 12,000, supplying 35,000 tons of potatoes per year and West Bengal now has one of the highest yields in India among Frito-Lay-assisted potato cultivators. Banks are extending low cost credit to farmers because they trust the Frito-Lay-farmer partnership.

This collaboration -- set in motion by harnessing the benefits of fresh ideas and new technologies -- has increased farm productivity and growth and most importantly, spread prosperity among the agricultural community. This partnership has also enabled the Frito-Lay factory in West Bengal to become the company’s largest food processing facility in Asia. I just wish that Frito Lay would sell its tangy Kure-Kure chips in the U.S.!

On the energy front, Kolkata-headquartered Coal India plays a significant role in securing India’s energy requirements. The company accounts for more than 80 percent of coal production in the country. Coal India buys hundreds of millions of dollars worth of state-of-the art American mining machinery, supporting thousands of American jobs while improving the company’s mining efficiency and boosting coal production with minimal impact on the environment.

Also, in the north-east Indian state of Assam, a number of American oil and gas majors like Chevron, Schlumberger, and Halliburton, are actively engaged with Indian public sector oil and gas companies. Indian companies are using American cutting edge technologies to prospect for new oil and natural gas reserves, increase production from aging oil and gas fields and improve production, energy efficiency and environmental compliance of the crude oil refineries.

Even in the far-flung state of Tripura, General Electric is supplying the turbines for Oil & Natural Gas Corporation’s (ONGC’s) 726 Mega Watt gas-based thermal power plant that will make optimal use of the state’s natural gas reserves and provide electricity to the power deficit north eastern states.

An unconventional energy source, shale gas has the potential to play a role in fueling India’s ambitious economic growth targets. As India’s Ambassador to the United States Meera Shanker noted in Washington last week, the Government of India is committed to pursuing shale gas exploration methods that will be ecologically sound. India’s Oil and Natural Gas Corporation is making use of America’s expertise in shale gas exploration and production by partnering with Schlumberger to commence shale gas exploration in India with a pilot project near Durgapur in West Bengal.

Finally, I’d like to turn to an area that may well define our cooperation in the years to come, and also help make a quantum leap in the trajectory of India’s economic growth. I’ve talked about the vast need for infrastructure in India, and the critical role that U.S. firms could play. The construction of the Nivedita Bridge over the Hooghly River embodies that concept.

The futuristic Nivedita Bridge opened to traffic in 2007, and is a tangible example of how American contributions can help make Indian infrastructure projects successful. The bridge was designed by San Diego-based International Bridge Technologies, Inc., and constructed by a consortium that included the leading U.S.-based infrastructure firm Parsons Brinckerhoff. The bridge itself has been a complete success, an example of how innovative public-private partnerships leveraging American content can directly respond to the needs of West Bengal.

In conclusion, I believe we have reached the threshold of an extraordinary period of business and economic convergence. One needs only to contrast the type of cooperation we enjoy now, to the relatively meager cooperation of, say, 20 years ago, to appreciate how far we’ve come! But for you, the young entrepreneurs and sage business leaders of Kolkata, West Bengal and beyond, I know that even the status quo is not good enough. Through strong bilateral ties and even closer people to people bonds, I assure you that the best is yet to come in U.S.-India trade and commercial relations.

With that, ladies and gentleman, as Tagore once said “you can't cross the sea merely by standing and staring at the water.” Our people, our businesses, our diverse, intertwined knowledge-based societies will support the next chapter of the U.S.-India partnership. The time is now to turn our imaginations – both here in the United States and India – into reality. All of your counsel -- from right here in Kolkata, the city where India and East Asia come together -- will be instrumental. Thank you very much for your time, and I’d be pleased to take your questions.