The Importance of U.S.-India Business and Economic Relations
Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
Thanks so much Zubin for your kind introduction, and your stellar leadership on improving U.S.-India economic and commercial ties through your involvement with American Chamber of Commerce in India. Your work as Chairman of the U.S.-India Energy Cooperation Program (ECP) is deeply appreciated, and will undoubtedly play a critical role in helping to shape our future bilateral cooperation on everything from finding clean energy solutions, to broadening our commercial ties.
I’d also like to thank Ajay and AmCham India for convening this very important “Doorknock” delegation program. I can’t think of a better way to help further strengthen our two nations’ bilateral economic and commercial relations than to bring such a talented group of business executives to Washington to share their on-the-ground knowledge and insights with U.S. government officials. You all are corporate America’s diplomatic corps; working every day on the front lines to improve our nations’ business ties. I’m very much looking forward to hearing from all of you this morning, on your ideas for how we can work together to help our economic partnership achieve the full promise of its amazing potential.
Lastly, I must acknowledge my close friend and colleague Kurt Amend, who will speak this morning about the vigorous political-military cooperation that exists between the United States and India. Along with his distinguished service to the State Department as Principal Deputy Assistant Secretary of the Bureau of Political-Military Affairs, Kurt brings exceptional knowledge of India to the table, having served as the Trade and Investment Officer in New Delhi a decade ago. It is great to be here with him today.
I. Why Does India Matter to the United States?
I certainly 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 many ways, our business-to-business and people-to-people ties will increasingly come to define the U.S.-India relationship.
I also don’t need to cite for this crowd the statistics showing how fast India’s economy is growing and how far this growth will take it. What I would like to share with you at the outset is the U.S. government perspective on India and why we view it, as President Obama has said, as “an indispensable partner for the 21st Century.”
People often ask why a country like India is so important to our interests in a time where domestic issues – from unemployment to rising energy costs – tend to dominate the headlines. The answer is simple: India’s values, systems, and core strengths mirror our own.
Our relationship with India is particularly notable, due to the 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-driven economy and of the knowledge-based partnership that we share.
As the largest democracy in the world, India has extraordinary “people power,” with a population that laudably pins great value to social issues and democratic ideals. A recently released report cites India as having over 3 million popularly-elected politicians across national, state, and local constituencies, with over one million of those officials being women.
That amazing figure not only demonstrates the sheer size of India’s political system, but also shows the extent of power that the voting public wields in India. With its democratic values, recent efforts to fight graft, and the adoption five years ago of the Right to Information Act (RTI) – reportedly the most utilized law in the world – the so-called “India model” extends far beyond growth, innovation, and management gurus. It is a model for how a country will rise with, and not in spite of its citizens, in the 21st century.
India is on track to have the largest population on the planet by 2030, and might have the largest economy by 2050. India’s rise is fueled by a young, optimistic, dynamic, educated population.
In addition to our shared values, 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 complementary strengths we share with India offer a great platform with which to leverage these unprecedented market opportunities. The potential for innovative solutions that can arise from partnering world-class American technology with Indian corporate local know-how is virtually limitless.
These opportunities span across multiple sectors.
Just as Norman Borlaug’s agriculture innovation and his collaboration with Indian scientist M.S. Swaminathan helped to spark the Green Revolution of the 1960s and 1970, the U.S. and India are again collaborating to transform food security in India as part of an “Evergreen Revolution.”
Our experts are developing, testing, and replicating transformative agriculture technologies, our scientists are collaborating on monsoon forecasting, and our businesses are investing in food processing infrastructure to help India improve farm-to-market linkages.
The boundless potential for e-commerce, telecommunications, 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.
On infrastructure, too, the opportunities are enormous.. 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.
But how do we best penetrate this complex market? For one, the U.S. government – through Treasury’s U.S.-Economic and Financial Partnership with India is working to help develop financial instruments and public-private partnership models to mobilize the significant private capital that will be needed to build the India of tomorrow.
India, as the President noted during his watershed trip to India in November, “is not simply emerging; India has emerged.” However, the U.S.-India story still contains untapped potential and unrealized gains.
· In the private sector, businesses would like to be able to move faster. India is in the process of embarking upon a major period of infrastructure upgrades, which, once completed will lower the costs of doing business, including in crucial Indian growth areas like manufacturing.
· In addition to infrastructure, India has energy security concerns. As a recent report by Standard Chartered has suggested, India faces commercial energy consumption growth to rise at least 6% a year for the next several decades.
· As the Indian government itself acknowledges, growth presents its own challenges. Managing growth in a way that includes all segments of society is a top focus of the Indian government. I know your businesses, too, understand that truly sustainable economic growth is best achieved by cultivating a broad base of support for market-driven approaches. Indeed, I know many American businesses are spearheading innovative strategies that don’t just sell goods and services in a vacuum, but also help enable the local ecosystems within which they work. Why? Because you understand that activities like strengthening supply chains and training workers have multiple long-term payoffs. You know that enabling ecosystems will enhance the labor pool, build stronger suppliers, and create millions of new consumers!
We are also working hard to address these concerns, partnering with the Indians on everything from clean energy to education. The challenges are real, but we confident that with more strategic cooperation will come great benefits.
II. Regional Economic Integration for the Future
The opportunities flowing from a stronger partnership exist not only in the U.S.-India corridor, but across the globe. I’d like to turn now to what has become the topic de jour amongst India watchers in Washington, which is how the United States can promote regional integration and expanded commercial ties between India and its neighbors.
The world is moving from a transatlantic century to a transpacific century, in which future economic growth, development, and the promise of innovation will come to define the rise of Asia.
The pace of economic integration in the Asia Pacific region over the last two decades was unprecedented and serves as an example for other regions. It should, and I believe it can, be replicated in South Asia as well.
At the moment, South Asia is one of the least economically integrated regions in the world. While accounting for nearly 23 percent of the world’s total population, the region’s share of global GDP is less than 3 percent.
In the United States’ engagement with the countries of South Asia, one of our overarching objectives is to facilitate new linkages and opportunities for ALL the nations in the region. Reinvigorating trade and commerce between India and Pakistan, for instance, can provide extensive benefits to both countries and the vibrant societies that seek to flourish within them.
Increased economic openness across South Asia, including between India and Pakistan, will generate new economic opportunities for one of the world’s youngest and most vibrant populations. Just as the private sector did in ASEAN, trade associations such as the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) can play a significant role in improving trade relations between India and Pakistan.
Recently, FICCI set up two “Made in Pakistan” business and product exhibits in India, which were well-received. FICCI now plans to organize similar “Made in India” exhibitions in Pakistan for which it is closely working with the Federation of Pakistan Chambers of Commerce and Industry.
Clearly, there is pent up demand for trade between Indian and Pakistan, as demonstrated by the volume of trade that transits third countries to avoid restrictions or endures the cumbersome offloading and reloading that occurs at the land border. Some analysts estimate that trade between India and Pakistan could be ten times what it is currently if both Government’s work together to relax economic restrictions on cross-border trade.
And to provide context, official bilateral trade between India and Pakistan reached $2.75 billion in 2009 from $215 million in 2001. Ladies and gentleman, those numbers will only grow as India’s consumer class balloons.
This is clearly something Indians and Pakistanis want. As a Pew Research Center poll noted this week, although India and Pakistan publics are admittedly distrustful of each other, both sides strongly desire an improvement in relations. Their motivation stems from a desire for greater economic opportunity and prosperity, which will undoubtedly lead to peace, stability, and a better quality of life for both Indians and Pakistanis.
Indian Prime Minister Manmohan Singh put it best, when he said in 2007, "I earnestly hope that relations between our two countries become so friendly and we generate such an atmosphere of trust between each other that the two nations would be able to agree on a treaty of peace, security and friendship. I dream of a day, while retaining our respective identities, one can have breakfast in Amritsar, lunch in Lahore and dinner in Kabul. That is how my forefathers lived. That is how I want our grandchildren to live.”
In fact, we see enormous potential in India’s critical role as part of a “New Silk Road,” concept based upon the revitalization of trade and transit linkages between the South, Central, and West Asia.
Frankly, at the State Department, we feel like we’ve been ahead of the curve on this. In 2006, through reorganization we combined the separate South Asian and Central Asian bureaus to create SCA, or the Bureau for South and Central Asian Affairs. This has enabled us think more broadly about the region as a whole, allowing us to streamline initiatives and ideas that would have been otherwise subject to stove-piping.
We’re going to review the potential for further for infrastructure investment and related capacity necessary to enable Afghanistan’s future sustained economic growth. Our priority projects in fields like energy, road and rail infrastructure, and trade/border management will help infuse new economic life into this critical region.
Intensified engagement is needed to solidify this regional approach. Our hope is to build Central Asia commercial connections for these projects, and to link Afghanistan to India and other South Asian markets. These projects, particularly in energy and transportation, could have multiplier effects on the regional economy and may be the future key drivers of GDP and employment. With India as an anchor, U.S. government and businesses alike can pursue greater stability and prosperity throughout South Asia and beyond.
III. What’s Next?
So, what’s next? We in government are absolutely committed to doing everything we can to open new opportunities for trade and investment. Government can’t create or run businesses, but we can act as a facilitator. We can help create the regulatory and incentive framework that promotes innovation and economic growth.
We have a variety of mechanisms for doing so. Finance Minister Mukherjee will visit Washington at the end of June to continue the U.S.-India Economic and Financial Partnership talks with his counterpart Treasury Secretary Geithner. And Indian Commerce Minister Anand Sharma is here in Washington right now, to meet with U.S. Government officials and business leaders.
There are also specific fora that are designed to address the technical ways that we can improve our trade cooperation. 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.
We are also expanding our cooperation in science and technology. The establishment of a new $30 million Science and Technology Endowment Fund will fund promising research and development projects in India. Such initiatives enhance our knowledge-based partnership, and reinforce the need for pro-entrepreneur policies including strong intellectual property laws, robust links between industry and academia, and greater access to capital.
Next month, the Secretary of State will travel to New Delhi for the second U.S.-India Strategic Dialogue. The “SD” – as it is called by India watchers in Washington and Delhi alike – will provide an ideal opportunity to discuss with the Government of India how we can proceed with our many bilateral commercial and strategic aspirations.
I’d like to close this morning by issuing all of you a challenge: You have a unique opportunity before you. Through your work and your continued engagement with both our governments, you can help shape and nurture the economic destiny of a nation, of a region, and one of the most consequential bilateral relationships that the United States enjoys.
Together, let’s continue working to further leverage opportunities for partnership, trade and investment.
Together, I am confident we can lift the U.S.-India global strategic partnership to reach its boundless potential.
With that, I’d like to turn it over to my friend Kurt Amend. Thank you very much and I look forward to your questions later in the session.