Speech by the External Affairs Minister, Mr. Pranab Mukherjee at the Conference on "Business in and between India and the US- Legal and Regulatory Framework"
May 4, 2007
Mr. Lalit Bhasin,
Ladies and Gentlemen,
I am very happy to be invited to speak at the opening of this conference on the legal and regulatory framework for business in India and the US. This initiative taken by the Indo-American Chamber of Commerce and the Centre for American and International Law is a timely one. I am aware of the commendable work done by both the organizations in their respective areas and I am glad that they have chosen to focus on an issue that is topical. I hope that the conference will provide an opportunity for meaningful discussions that, in turn, would result in recommendations to the two Governments and help us further strengthen our bilateral strategic partnership.
The recent upsurge in India-US relations has caught everybody’s attention. Developments over the last few years, including the landmark reciprocal visits by Prime Minister Manmohan Singh and President Bush within the space of eight months in 2005-2006, have unfolded the full extent of the transformation underway between the two countries. There is a considerable degree of expectation and excitement, not just in New Delhi and Washington, but in different capitals around the world. The agenda that the two countries are engaged in today is an impressive one, covering a wide range of economic and trade objectives, energy and environmental concerns, science and technology collaboration and defence and security cooperation. It is no wonder, therefore, that the strategic partnership between the two countries has truly matured into one of considerable substance.
At the same time, observers of the relationship, especially in the last two years, have devoted a significant proportion of their attention to the landmark India-US nuclear understanding. I am not trying to diminish the importance of this initiative in any way. In fact, much of the attention it has received is a reflection of its tremendous importance, including its impact in changing perceptions both among the public at large and within our two governments and we remain committed to implementing the understanding expeditiously in a way that it adheres as closely as possible to the framework of the July 2005 Joint Statement and the March 2006 Separation Plan.
However, behind all of this and away from the public eye, there has been a quiet but steady consolidation of many other vital aspects of our relationship, especially in our trade, investment and economic cooperation, the high technology and S&T cooperation, the energy dialogue, and cooperation in agriculture. These are also aspects of our partnership that have important developmental implications for us and where we feel the India-US partnership can be leveraged to fulfill some of our national development objectives. In that sense also, one must appreciate the full extent of the unique turn that this relationship has taken.
The economic aspect of our interaction, in fact, always provided a strong underpinning to our relationship, even when the level of political engagement was not quite where it is today. However, in recent times, the pace and scale of its expansion, engineered partly by India’s own economic growth and partly through a series of active and joint government initiatives, have been quite impressive.
The US is today India’s leading foreign investor and our largest trade partner. Ambassador Blackwill’s erstwhile description of our trade being “as flat as a chapati” is now a thing of the past. We are now the fastest growing export market for the US with our bilateral trade growing by over five times in a period of 16 years from a modest $5.6 billion in 1990 to $31.92 billion in 2006. While the balance of trade has been in India’s favour with Indian exports to US growing in excess of 16% last year to stand at $22 billion, US exports to India have also picked up in recent years. In 2006, they stood at over $10 billion, almost 26% higher than the previous year’s figures. In fact, over the last five years, US exports to India have doubled. Of course, we feel that a further easing of high technology restrictions on India can help narrow the trade deficit further and we remain engaged with the US to achieve this objective as a priority.
In the area of foreign investment too, US foreign direct investments since 1991 has been more than $5.5 billion, accounting for more than 13% of the total FDI in the last 15 years. Besides, Foreign Institutional Investment from the US has also been on the rise – over 1/3rd of the FIIs are from the US. What is notable is that foreign investment is no longer a one way street. Reports of overseas investments by Indian companies, including through acquisitions, have become routine. In fact, Indian investments abroad last year matched investments made in India and a number of Indian business groups, such as the Tatas and Mahindras, are increasing their footprint in the US.
Even before the July 2005 visit of the Prime Minister, the two Governments had begun to focus on a reinvigorated economic partnership. A decision was taken to re-energize our economic dialogue that would focus on key areas that required high level attention. The results are there for all to see. We saw an important legacy issue of Dabhol set to rest. India and the US signed an open skies treaty that is set to have effect in areas much beyond the aviation sector alone. It is not just impacting on figures of aircraft procurements, but is also reflected in tourism figures. An agreement with the US Trade Development Agency in February 2005 to facilitate infrastructure investment has led to the USTDA partnering or promoting activities in areas such as patent training, agricultural biotechnology, cold chain system improvement, aviation cooperation, coal bed and coal mine methane clearinghouse and in oil and gas sectors. In the area of agriculture, we are implementing the bilateral Agriculture Knowledge Initiative which is premised on our experience of green revolution and the compelling need to revive that process to redress the imbalance in this sector which has not kept pace with overall growth of the Indian economy. Last, but not the least, the Indo-US CEO’s Forum is fulfilling a vital role in providing practical recommendations on removing bottlenecks and bringing about policy changes that would bring the desired transformation in the way we do business with each other.
Given the fact that both countries are knowledge economies with very strong technical and scientific manpower, high technology naturally underpins almost everything that we have started together in the past few years. The US is India’s largest technology collaborator and the High Technology Cooperation Group, a private-public partnership focusing on the key areas of biotechnology, nanotechnology, information technology and defence technology, is charged with working towards facilitating and easing licensing restrictions in respect of India. As a result, from 24% of total U.S. exports to India requiring a license, we have today a situation where less than 1% of US exports have to be licensed. An important development in this area was also the signing of an S&T Cooperation Agreement in 2006. The Agreement has an IPR protocol that will help redress, along with India’s Patent Act, the imbalance in patent generation within India. Space is another important area where our skills and comparative cost advantages can benefit both sides in partnership. Apart from cooperation on space science, earth navigation and space education, we have an agreement that will allow two US instruments to be included in our Lunar Mission Chandrayaan-I demonstrating the tremendous potential in this area.
A very important aspect of all that we do together in the economic sphere is our dialogue on energy. Secure and sustainable energy sources are vital for ensuring India’s high economic growth rates and enable it to address the developmental challenges of the poorest of its citizens. We need to tap all sources of energy and keep our options in this regard open. It is an appreciation of this need that is at the heart of the India-US civil nuclear understanding and the larger energy dialogue which focuses on oil and gas, coal, power and energy efficiency and renewable energy and new technologies. The benefits are already visible. India became a partner in the US-led international FutureGen near-zero emission power plant research project in April 2006. The US has also supported India’s participation in the Integrated Ocean Drilling Programme, which we are likely to join shortly. In non-conventional energy, the focus has been on the development, deployment and commercialisation of technologies for sustainable and renewable fuels. In civilian nuclear energy, India joined the ITER fusion energy research project with the support of US and other key partners. These efforts are complemented by the participation of India and the United States – along with Australia, China, Japan and ROK – in the Asia-Pacific Partnership on Clean Development and Climate that seeks to provide technology and market solutions to energy requirements while meeting environmental challenges.
Ladies and Gentlemen, I have attempted to lay out the extent of the India-US economic partnership. The challenge lies in keeping the momentum going. We as Government are committed to the objective of realizing the full potential of this relationship. The natural affinities and complementarities between us have never before been so closely supplemented by a strong political convergence. I am hopeful that industry will continue to provide the lead in this area. We, in the Government, remain committed in the role of a facilitator. I also hope that at the end of this Conference, we will have a set of recommendations for the two governments. I wish the organizers and participants well. With those words, I thank you very much.