June 1, 2005
All of this morning you have had a battery of eminent speakers, qualified analysts and successful industrialists speak of the Indo-US trade relationship over the last three decades – decades which have coincided with the existence of the USIBC. You have assessed how far we have come, and you have even debated what the next 30 years could hold. I have been asked to speak on “2035: Where We Want To Be”; in a sense, I have been asked to simulate the future.
In spite of the fact that India is famous in history and legend for its sooth-sayers fortune-tellers and transcendental gurus, I must confess that I possess none of these crystal gazing powers. And yet, it is with a quiet confidence that I can assert where we will be in 2035. I can say this because I know where we want to be, and I know that we have the wherewithal to get where we want to. My vision – the vision that I hope to share with you over the next half-an-hour – is principally about India; but it is not about India alone. My vision includes also the United States, because it is the Indo-US partnership that we have all gathered here today to celebrate.
More than 50 years ago India made, in Jawaharlal Nehru’s prophetic words, “a tryst with destiny”. The initial decades of our independence were years of struggle and difficulty. In an effort to construct the foundations of a strong and healthy industrial economy in what was essentially an agrarian society, India adopted several socialistic measures. The commanding heights of the economy were brought under government control. The results were not unmixed. Some facets of our early economic policy were admittedly not ideal. But it would not be correct to dismiss the entire gamut as misdirected. Even our severest critics would have to admit that in the 50s, 60s and 70s it was the active role of government and the public sector enterprises that contributed in great measure to our solid industrial and infrastructural base. We also became self-sufficient in food, and the spectre of famine was forever banished by the Green Revolution of 1970s.
But this was not a situation that could go on indefinitely. The creative energies and the entrepreneurial spirit of the Indian people was straining at the leash. What should have been a smooth transition from a planned economy to a liberalized globalised one did not happen automatically. But then, does anything happen ‘automatically’ in politics and economics? Are there any ‘smooth transitions’ in the real world entailing paradigm shifts in economic policy?
Times change, circumstances change. And with times and circumstances, policies change too.
A decade and a half ago the prospect of India becoming a major player in the global economy seemed a distant dream, only a theoretical possibility. During the last 14 years there has been a sea change not only in the world’s perception about India’s future, but in our own perception about ourselves. The world has acknowledged the ‘arrival of India’. We no longer discuss the future of India: we say “the future is India”. Be it the Goldman Sachs “Dreaming with BRICs” or even the CIA’s “Mapping the Global Future” – and a slew of other similar reports – all substantiate this vision of the future.
If we wish to simulate the future, we will have to summarise the present. India is too complex a concept to be encompassed in trite phrases, but if I was to characterize the Indian economy of today by just three adjectives, I would put it as: “India: Fastest-Growing Free-Market Democracy”. These adjectives have been chosen by us with deliberation and thought. To us, each phrase represents an important and fundamental truth about our economy, our people, our culture, our values and, indeed, our very ethos.
The India of today is vastly different from the India of 14 years ago. It was our Prime Minister Dr. Manmohan Singh who, as Finance Minister in 1991, initiated the economic reforms. Our reform programme transformed our earlier policies in the investment, monetary and trade sectors. The Indian economy is now growing at 7% per annum on a sustained basis. Our exports are 80 billion dollars, our imports 105 billion dollars and our foreign exchange reserves are a comfortable 140 billion dollars. India has developed a ravenous appetite of late, and the country’s consumer, infrastructure, transportation, energy, environment, healthcare, education, hi-tech and defence sectors represent a market that exceeds tens of billions of dollars in each sector.
All this has not come easily to us. We have struggled within the confines of a fiercely alive and robust – should I say raucous? – democracy. But Indians today recognize the value of globalization, and a distinguishing feature of our reform process has been its continuity, based on a broad consensus. The reforms are irreversible.
In India, our one billion people are our greatest strength. We have a literacy rate of 70%. We have a skilled workforce. We have engineering and management institutes which can hold their own against the best in the world. And, of course, we also have the English language! Our objective is how to leverage our social strengths into economic gains. We want to bring economic prosperity to our people, and bring it fast. We no longer dream of a better life for our grandchildren or children – we want a better life for ourselves. Rapid economic development within our own lifetime is what we seek.
I would not like to compare India with China. Comparisons are always invidious. I would only speak about India’s unique strengths. In India it is our institutional strengths that we are proud of. We are a democracy and wear it on our sleeve. We do not see democracy as a hindrance or a luxury, but a necessary and desirable way of life, part and parcel of the Indian ethos: the Rule of Law, a vibrantly free Press, a fiercely independent judiciary and administrative transparency. These may slow things down a bit, but only in the short term. What is more important is that India has an open system with social and political safety valves, and a regulatory environment that provides comfort, long-term stability and security to the foreign investor.
I recently came across an interesting article in the Financial Times entitled: “India’s IT recruiting struggle”. I expected it to be a description of the challenges being faced by recruiters in India’s IT sector in Bangalore or Pune. On closer inspection, I realized this article was under the “Investing in China” section! Occupying nearly the entire editorial content for the page, it elaborated on challenges being faced by Indian IT multinationals like MphasiS in executing plans to use Shanghai as a launch pad for the Japanese market, and the dearth of suitable staff they were facing in China!
This is only indicative of the forays being made by Indian companies across the world. Last year Indian companies made 60 acquisitions worldwide, fuelled by a passion to go global. Indian investment in the UK in 2004 exceeded UK investment in India. The cumulative investment of India in Australia has outstripped Australian investment in India.
2035 will, I believe, demonstrate a vastly different landscape. India is engaging in a number of Regional Trade Agreements, with her SAARC neighbours as well as with South East Asia. Even with China, with whom our trade a decade ago was just a billion dollars a year, it is now more than a billion dollars a month! Road communications are opening up with South East Asia through Bangladesh and Myanmar. Political relations with Pakistan are fast improving. Ancient trade routes to Central Asia could well revive in the next few years.
By 2035 I think that India’s population would have stabilized at about one-and-a-half billion. We will certainly have achieved 100% literacy and I am confident that we would have provided a standard of living for our people comparable at least to what developed countries enjoy today. Our focus then will no longer be so much on ‘fast’ growth, but rather on sustaining the fabric that enables us to remain a ‘free market in the democracy’. Essentially, the same stuff that makes up the fundamentals of the USA. And this is the ‘peg’ around which we must rally if we want to be where we want to be in 2035 – common ground! To get to common ground over a 30 year landscape, I envision 5 milestones marking a broader and deeper India-US partnership:
First, the Nature of Engagement: The Indo-US relationship will be a strategic partnership, covering not just international peace and security, but under-pinning this with close trade and commercial ties. The definition of “strategic partnership” assumes a convergence of beliefs, and a shared vision of the future of the world. I am certain that in 2035 the US and India will have indeed developed such a common vision for the world. Actually, I am fairly optimistic that we won’t have to wait that long either!
Second, an Enabling Environment: The world of the future will be far smaller than it is today. The movement of people will have to become easier, if we are to truly leverage the changing demographic landscape of our countries. In India I have spoken of the “Served from India” brand to stand side-by-side with “Made in India” because I firmly believe that in the years to come India will become a Knowledge Hub of the world; a hub which will serve the future workers in ways unimaginable today, through a convergence of technologies. But the foundations of that future must be laid today. We must craft a conducive policy environment within which we can encourage and, indeed, motivate our people to leverage the inherent advantages that our combined socio-economic systems offer.
Third, Building Stronger Physical and Virtual Networks: These networks are forged through bilateral investments as well as through technology cooperation. Today India actively seeks FDI from the USA, but India is also eager to invest in the USA. Two-way investment binds us, but this network cannot be held together merely by the glue of greenbacks; it must be underscored by technology transfer and technology exchange. India is a society that places much value on technology. Innovation has a central place in Indian civilization since the very beginning. It is striking indeed to think that we gave the world that potent numeral “0” (Zero), and you added a “1” (One) to it, to create a whole new Binary World. Indeed, the nature of our engagement must evolve this “binary” partnership further.
Fourth, Integrating our Markets: Our bilateral trade in merchandise goods as well as services will expand to be among the highest in the world. Today Indo-US trade is 21 billion dollars, and our Services trade is perhaps another 15 billion dollars. In 2035 barriers eventually will come down. As the world shrinks, there has to be alignment around fundamentals. There will be a convergence of consumer needs in both our societies. If we have to fulfill these needs jointly, we will have to develop some innovative and creative ideas for rapidly expanding our bilateral trading. It is towards that sort of reality that we must work by methodically facilitating the removal of barriers that keep our markets apart in many spheres.
I am certain that in the future, the flow of goods and services, as also the flow of people, will become far easier, and more relevant to our communities’ needs and requirements.
Fifth, Nurturing Shared Values: Eventually it boils down to this: a strong sense of what is right, and an even stronger sense of what isn’t. The idea of family. The idea of freedom and democracy. When all else fails, in the future, we must fall back on a set of shared values. Towards that goal, we must begin the work today! What are already today the world’s strongest democracy and the world’s largest democracy, would have to enhance their engagement based on their shared values, respect for the individual, free speech and liberty.
In 2035, I believe that the Indo-US partnership will be constructed on each of these five pillars. Even today, separated as we are by half a globe, we are countries with great similarities and complementarities. We are presented with an opportunity that we must act upon it. An opportunity to effect positive change for the benefit not only our nations, but for all of humankind.
I would like to conclude on a lighter note by paraphrasing a piece by Swaminathan Aiyar – an economist and a Member of our Board of Trade. This is an imaginary inaugural speech at the World Economic Forum of 2035:
“Ladies and Gentlemen, let me welcome you to the Annual Meeting of the World Economic Forum in Kashmir. This brings to a happy end the recrimination that, sadly, has plagued our organization for several years”.
“You will recall that the United States had for long been suggesting Colorado as a venue. Then Chinese businessmen began boycotting Davos in 2020 on the grounds that China was now richer than any European country, and so the Annual Meeting should be held at Shanghai”.
“Then again last year, Indian businessmen joined the boycott, pointing out that India had surpassed not only every European country but also Japan in GNP (as was predicted with uncanny accuracy by the CIA in 2005). India demanded that the annual meeting be held in the peaceful and idyllic State of Kashmir”.
“I am glad to say that we have reached an amicable resolution: the Annual Meeting will now be held in rotation every three years in Davos, Shanghai and Kashmir, and every leap year in Colorado!”
This is where I hope we will be in 2035.