Prime Minister Vajpayee's address at the U.S. - India Business Summit

New York
September 13, 2000

I am happy to be with all of you this morning for the US-India Business Summit.

I congratulate the CII for arranging – or, rather, re-arranging – this event. I am sorry for the inconvenience caused to you because of the change in the date of this event.

I value this interaction with such a wide cross section of trade and industry. New York symbolizes the spirit of enterprise and innovation. It is this spirit that has driven the US economy with such distinction.

We have watched with admiration the longest period of economic boom in the United States. We have carefully assessed its impact on the global economy, including on our economy.

We are reinforced in our conviction that there is a natural synergy between our two societies in many spheres. This also includes the economic sphere.

What unites us is not only our common commitment to democracy, liberty, openness and pluralism. It is also a perspective on economic growth. A perspective in which private enterprise is given maximum encouragement by the State that limits its own role to that of a facilitator and impartial regulator.

For historical reasons, private enterprise in India was not assigned the desired role in the initial decades after Independence. Since the Nineties, we are correcting this situation by a comprehensive set of economic reforms.

My own Government is committed to further broaden, deepen and accelerate the process of reforms. We are convinced that this will unleash the full potential of economic growth and social development in India.

I am happy to note that the US Government and US enterprises have responded positively to the historic change being effected in the Indian economy.

The United States is today India’s largest trading partner. The US companies are also the largest investors in India.

Most major US corporations, banks and financial institutions are present in India. We value their contribution to our economic growth.

Equally, I am sure, they value their business in India and the contribution that our expanding economy is making to their business profitability. We would like to deepen this relationship.

In the last ten years total approval for US investments to India is a mere 15 billion dollars. Actual flows are even smaller.

In the context of the new opportunities, we must dramatically alter this arithmetic. Let us accept a target of a 5 billion dollars of annual flow beginning next year and raise it to 15 billion dollars over the next three years.

This is ambitious. It is, however, achievable.

Let us also agree to at least double bilateral trade flows over the next three years. There is enough scope for that.

I realize that apart from motivating you, we also need to change. I am not unmindful that you often find our rules, regulations and procedures burdensome.

There is an image problem often described as "hassles of doing business in India". This is partly a communication problem.

The success stories do not circulate fast enough. One failure proves infectious.

Many approved projects are languishing. Assistance in project implementation is one area that needs to be strengthened.

I am, therefore, creating a Strategic Management Group in the Prime Minister’s Office where difficulties encountered by large investment projects will be speedily resolved. An Inter-Ministerial Team would assist this Cell. The Group would directly report to me once a month.

Many of the project problems concern State Governments. I would be urging the Chief Ministers to take a similar initiative. I am sure that this will impart some momentum and seriousness to address ‘implementational concerns’.

Distinguished American businessmen, when you look at India, I urge you not to be overly influenced by the size of the present bilateral economic engagement between our two countries.

Rather, take a long-term view by looking at the magnitude of the opportunities and rewards as they will unfold in the future.

The interests of India and the United States are complementary. Let us harness this complementarity to the fullest.

India today is among the fastest growing economies of the world. Our annual growth of over 6% in the Nineties makes us among the top ten fast growing economies in the world.

On our Independence Day this year, I have pledged my Government to a new target: The target of doubling our per capita income over the next decade.

This implies an annual GDP growth of 9% and more. This is a daunting target, but a target that India will achieve.

The reform process in India is on an irreversible course. Discussions and differences within the party and across parties are natural in a democratic polity.

Open public discussion fortifies national consensus. It mobilizes social support and protects reforms from uncertainties of political change.

We also want to alter the focal points of change. As a result of our efforts, reforms are being perceived less and less as being ‘elitist driven’.

We are taking concrete measures to cushion the impact of change on the weaker sections of the society. The trickle down effect of growth is often slow. Which is why, we are consciously trying to harmonize faster economic growth with equitable development.

We are determined to ensure that the benefits of reforms do not bypass the common man.

We have strengthened the focus on agriculture and rural development. Areas like rural connectivity, safe drinking water, shelter and sanitation are being given higher priority.

We are paying far greater attention to the development of the social sector – especially primary health and primary education. We know that this is critical for the enrichment of India’s vast human capital. This is also the most important resource in the emerging era of the Knowledge Economy.

As a result of our initiatives, the constituency for reform is rapidly enlarging.

My Government has created many new opportunities for private investment. Let me illustrate this:

A. There has been a massive deregulation to create investment opportunities in infrastructure.

B. We now have a world class Information Technology Policy. The IT and other knowledge-based enterprises offer the greatest opportunity for mutually beneficial partnership between Indian and American businesses. We have already seen many successes of this partnership. But this is just the beginning. The future is going to be immensely more attractive and fruitful.

C. India now has the professional manpower to truly maximize the benefit from the "New Economy". We are doubling the number of professionals from our educational institutions in one year and tripling them in three years.

We shall encourage collaboration between Indian and American educational institutions for joint research and training. Further, private, NRI and foreign investment in education – especially in technical and higher education -- will be promoted

D. In the telecom sector there is total deregulation --

• On national long distance;
• On freedom to choose from own under-sea optical fibre cable;
• On basic telephony;

• VSNL’s monopoly on international long-distance telephony is being removed.

The Department of Telecommunications is being corporatised by 1^st October.

A Telecom Convergence Bill is in the offing.

• We are also considering how best to deregulate cellular telephony completely.

• We are building 13,000 kilometres of new National Highway in seven years.

• Ports are being corporatised and private participation in port building welcome.

• There have been complaints about power projects in the past. We want to undo this. Power requires huge investment in India to meet our energy needs.

The de-politicization of tariff fixation and its acceptance by many State Governments create new opportunities. I expect several important commercial agreements to be signed even during my visit.

Several large power projects languishing for years should see financial closure over the next four to six months.

A new Electricity Bill 2000, which significantly deregulates the power sector, is on the anvil. It will enable much greater consumer freedom. It will also enable private sector to take decisions on generation, transmission and distribution by unbundling them.

The regime for Direct Foreign Investment has now been made automatic. Sectoral caps are under constant review by a Group of Ministers. I expect further relaxations in many areas shortly.

Financial sector reforms are an area of high priority. Our financial institutions have adopted prudential norms consistent with international norms. Banking supervision follows the Basel guidelines. The disinvestment of Government equity in banks will be accelerated. This will further improve their competitive efficiency.

Disinvestment in general is receiving our close attention. We now have a credible disinvestment programme. During the course of this year there will be a significant disinvestment of some major companies covering the sectors of oil, telecom, airlines and hotels.

The resources realized would be mainly utilized to retire debt or meet social sector obligations. The Cabinet Committee on Disinvestment under my Chairmanship has been activated to achieve tangible results with definite milestones.

In sharing my thoughts on many of these issues I do not want to gloss over difficulties. Serious problems do exist in many areas, particularly long-term fiscal management.

While our tax rates are internationally competitive, tax administration needs significant improvement. Tax reforms also require urgent attention and the Double Taxation Treaty needs to be revisited.

Government expenditure needs to be pruned. Sustained action in this area is planned on the basis of the recommendations of the Expenditure Commission. The Fiscal Responsibility Act before Parliament would reinforce these measures.

State finances also need attention. The Finance Commission has made some important recommendations and it is my intention to pursue them with seriousness.

In short, there are enormous opportunities. There are no doubt problems and risks of investment. I, however, venture to suggest that the opportunities far outweigh the risks.

The opportunities and a conducive environment will grow. The problems and risks will ease.

The extraordinary achievement of Indian Americans in this country is sufficient testimony to the human resource of skill and enterprise available in India.

We also have:

• A widespread use of English language;
• A transparent legal system and rule of law;
• Respect for sanctity of contracts;
• And, above all, an unbroken record of fully honouring all international obligations.

India is poised for high all-round economic and social development. Today I seek your partnership in fostering this change. Partnership in participating in our prosperity.

Having recognized each other as "natural allies", India and the United States are poised to vastly strengthen and deepen our bilateral relations in the new century. Let us build a strong foundation of Indo–US economic relations to support the beautiful architecture of our natural alliance.

May I leave you with the words of our great poet Rabindranath Tagore who said:

The Vision Statement signed between President Clinton and myself in March this year represents this new re-awakening. I seek your participation in realizing this common dream.

I thank you for the opportunity of sharing my thoughts with you.