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Diplomacy in Action

India: The Rise of an Economic Power


Remarks
Robert O. Blake, Jr.
Assistant Secretary, Bureau of South and Central Asian Affairs
Syracuse University
Syracuse, NY
January 25, 2011

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Remarks as prepared

Thank you so much for the kind words of introduction and your warm welcome. You know, everyone from Washington keeps telling me that late January isn’t the best time to visit Syracuse! In fact, I read that you have received a record amount of snow – some 115 inches – so far this year! But that does not seem to have deterred the good people of Syracuse. We in Washington could use a little of your expeditionary spirit. It only takes about three inches of snow for Washington to grind to a complete halt.

Snow or no snow, I’m so pleased to be here with you today. I’m honored to address such a dynamic and unique group of students, higher education leaders, noteworthy academics and others in attendance today. I want to thank Dr. Cecilia Van Hollen and the Maxwell School and the Moynihan Institute for Global Affairs at the outset of my remarks, for your generous invitation to me to visit this wonderful institution. I also thank you for not scheduling my speech to compete with tonight’s Seton Hall game.

I understand that the Maxwell School has a long history with India. A report conducted by a former dean, apparently still read today by civil servants, resulted in the creation of the Indian Institute of Public Administration in 1954. And of course the Moynihan Institute is named after one of the more prominent U.S. ambassadors to India.

Ladies and gentlemen, nearly 70 years ago, President Franklin Roosevelt identified the four essential human freedoms: freedom from fear; freedom of speech and expression; freedom of every person to worship in his or her own way; and freedom from want.

These fundamental freedoms underpin our society; they also function as catalysts for social, economic, and political progress. While these values have existed in India since its independence, India’s progress in each of these areas is becoming increasingly apparent to the world at large.

India shares our commitment to pluralism, religious liberty, universal education and the promotion of innovation and free enterprise. Indeed our mutual commitment to these freedoms animates our global strategic partnership and provides us with the energy and the courage to build a better world together.

I have been privileged to help advance the US-India partnership since 2003. One of the most striking assets our relations enjoy is bipartisan support in both of our countries. That has helped drive significant progress over the last decade, from President Clinton’s landmark visit in 2000, to the civil nuclear deal negotiated by the Bush Administration.

President Obama and Secretary Clinton came into office determined to take US-India relations to the next level. They have done so through the establishment of the first Strategic Dialogue between our two countries, chaired by Secretary Clinton and her counterpart External Affairs Minister Krishna, and through President Obama’s landmark visit to India last November.

President Obama’s trip will be remembered as a watershed, when the U.S. and India embarked for the first time on concrete initiatives to develop our global strategic partnership. The challenge before us now – one in which I expect smart graduate students and academic scholars to play a leading role in helping us to think through – is to define an agenda for both governments going forward that capitalizes on what we have achieved and meets the ambitious vision agreed by President Obama and Prime Minister Singh.

I thought I would use my time today to provide the context for India’s growing economic importance to the U.S., Asia and the world, and describe why it is imperative that we work with the Indians to grow their economy and society in a way that harnesses that country’s immense potential and serves American interests.

I’d like to start by providing a brief rundown of the key outcomes President’s November trip to India, which turned out to be one of the most successful trips ever taken by an American president to South Asia, and focus particularly on those accomplishments that showcase our broad agenda and the new dimensions of our global strategic partnership.

The President in India

The trip produced a number of significant new milestones that show how the United States and India are working together to advance global peace, security and development and illustrate why President Obama believes our relations with India constitute an “indispensable partnership” for the 21st century. As President Obama said in his November 8 speech to the Indian Parliament,

“For the first time ever, our governments are working together across the whole range of common challenges we face. Now, let me say it as clearly as I can: The United States not only welcomes India as a rising power, we fervently support it, and we have worked to help make it a reality.”

The big headline-maker was, of course, the President's endorsement of a reformed United Nations that includes India as a permanent member. The endorsement of an Indian seat on a reformed U.N. Security Council, as a permanent member, reflects our confidence that it is a country with which we will be working ever more closely to advance global security and prosperity.

During the trip, the Indian government positioned itself to take on a leading role in enhancing global stability by finalizing a $4.1 billion sale for ten C-17 Globemaster III heavy lift transport aircraft. Once all the aircraft have been delivered, ladies and gentlemen, India will have the second largest C-17 fleet in the world behind the United States –a highly visible manifestation of the U.S.-India defense partnership.

The purchase of six C-130J transport aircraft in 2008 will provide the Indian Air Force a strategic airlift and humanitarian response capability that is unique to the region and emblematic of India’s ambitions to play an increasingly global role.

Indeed, the President and Prime Minister agreed that in this increasingly inter-dependent world, the stability of, and our access to, the air, sea, space, and cyberspace domains is vital for the security and economic prosperity of all nations.

They therefore agreed to launch a dialogue to explore ways we can work together, as well as with other countries, to develop a shared vision for these critical domains to promote peace, security and development.

As we promote peace and security, there is no more important challenge than that of the proliferation of weapons of mass destruction. We took several important steps forward in that regard.

First, the U.S. and India signed a memorandum of understanding that allows us to cooperate on global nuclear security issues under the auspices of Global Centre for Nuclear Energy Partnership, which India announced at the 2010 Nuclear Security Summit.

Specifically, we agreed to give priority to discussion of best practices on the security of nuclear material and facilities, development of international nuclear security training curricula and programs, and joint outreach on nuclear security issues to our nuclear industries.

Second, the United States sought to ramp up high technology trade and collaboration through two critical steps. The U.S. agreed to support India's full membership in the four multilateral export control regimes (Nuclear Suppliers Group, Missile Technology Control Regime, Australia Group, and Wassenaar Arrangement) and the U.S. pledged to remove India’s space and defense entities from the Commerce Department’s Entity List as India aligns its export controls with global standards. The Department of Commerce published a Federal Register notice yesterday to fulfill that commitment.

These actions will open important new opportunities for our companies and governments on cooperating in the defense and space areas.

We also completed the government pieces of the civil-nuclear deal, opening the way for U.S. companies to supply billions of dollars worth of civil nuclear reactors for India's growing energy market.

Last, as leaders of the two largest democracies in the world, the President and Prime Minister launched a U.S.-India Open Government Dialogue on how we can democratize access to information, support global initiatives in this area, and share our own experience. Let me now turn to some of the activities we launched that did not garner the attention they deserve, but nonetheless could have far-reaching implications.

Clean Energy

In the energy field, the United States and India both are committed to charting a clean energy future because it makes clear economic sense and because it supports our mutual objectives to help slow the pace of climate change. We also believe there are important synergies we can exploit to accelerate our transition to a low carbon future.

While private sector linkages thrive, on a government level, we have committed to collaborate on innovative clean energy technologies through the bilateral Partnership to Advance Clean Energy, or PACE.

Under this initiative, we have already begun to undertake joint research efforts and the deployment of clean energy resources, such as solar, advanced biofuels, shale gas, and smart grids.

Our efforts to promote and improve access to cleaner electricity will ensure that children can continue to study after the sun has set and small businessmen and women will have more opportunities to prosper.

This cooperation will help to create green jobs at home, and improve living standards and stimulate the economy in India’s villages and urban centers.

The U.S. government seeks to encourage private sector participation in the development of India’s clean energy future. The Overseas Private Investment Corporation contributed $100 million to the $300 million Global Environment Fund in South Asia Clean Energy Fund, which will target India-only investment in clean energy.

The Export-Import Bank also signed a $5 billion MOU with Reliance Power to support the development of gas-fired electricity generating units and renewable energy facilities.

Our bilateral commitment to improve access to clean energy is also manifested by a public-private partnership to promote green building technologies. Prominent global companies like Wipro, Infosys, Walmart, Target, and Marriott are leading the way to commercialize and implement these technologies and practices.

Space

Like our clean energy efforts, a natural partnership exists between India’s human enterprise and the United States’ storied history of pioneering space exploration. The removal of Indian Space Research Organization, known as ISRO, from the Commerce Department’s Entity List will bring in a new era in space collaboration. No longer will we treat India’s space program as a target; rather, we hope that it will become a close partner.

The possibilities of cooperation between the United States and India in space, to advance scientific knowledge and human welfare, are without boundaries and limits.

To paraphrase former ISRO Chairman Madhavan Nair, India’s space program is only successful when it can produce benefits – material change -- for Indian citizens.

Indian farmers will see the fruits of our collaboration as U.S. and Indian space scientists work together on climate and weather forecasting for agriculture, navigation, resource mapping, research and development, and capacity building.

Our experts have developed enhanced monsoon forecasting that will begin to transmit detailed forecasts to farmers, beginning with the 2011 monsoon season.

India also is an emerging leader in earth observation, with the second highest number of earth observation satellites in orbit. American fishing fleets could increase their catch thanks to the collection of tidal data as part of this initiative.

We are seeking additional ways to collaborate on future lunar missions, the international space station, human space flight, and data sharing.

I hope that our private sectors will now have the opportunity to develop new avenues of cooperation in the space realm and build on our achievements to further improve the livelihoods of our populations. In fact, Commerce Secretary Locke will be traveling to India next month, and plans a meeting at ISRO to explore what more our two governments can do to encourage greater commercial cooperation in the space area.

Human Security

It is, of course, no surprise that both India and the United States – having realized the importance of human security to future prosperity and well-being – have pledged to partner in a number of key human security areas.

President Obama and Prime Minister Singh agreed to build on the historic legacy of cooperation between India and the United States during the Green Revolution, to work together to develop, test, and replicate transformative technologies to extend food security as part of an “Evergreen Revolution.” These efforts will focus on providing farmers the means to improve agricultural productivity.

Collaboration will enhance the agricultural value chain and strengthen market institutions to reduce post-harvest crop losses. Enhancing food security in India is vital to continuing India’s globalizing trends and sustaining our burgeoning strategic economic partnership.

This cooperation will also bring wider global benefits. President Obama and Prime Minister Singh announced during the President’s visit that the U.S. and India will begin trilateral cooperation with Afghanistan to capitalize on the significant efforts both of our countries are making to stabilize Afghanistan.

Specifically, our two leaders agreed to pursue joint development projects in Afghanistan in agriculture and women's empowerment and to strengthen capacity building efforts. They also agreed that for the first time, the U.S. and India will adapt our shared innovations and technologies and use our expertise in capacity building to extend food security to other interested countries, particularly in Africa.

Bilateral health cooperation marks another promising area of bilateral cooperation with potential global benefits. The U.S. and India signed an MOU establishing a Global Disease Detection network, which will involve a number of collaborative activities,

such as emerging disease detection, pandemic influenza preparedness and response, laboratory containment systems, and bio-safety training and capacity building. Employers know that a healthy workforce is a productive workforce.

The strides the United States and India have made in the last ten years have been impressive, but we know that the full potential of the global strategic partnership lies in the hands of succeeding generations.

To help ensure that all members of those generations enjoy the benefits of higher education, the Prime Minister and the President agreed to convene a U.S.-India Higher Education Summit, chaired by senior officials from both countries in 2011, as part of a continued effort to strengthen educational opportunities, and ensure that innovation and knowledge-based industry can continue to drive growth in our two economies.

The India Model

 

Ladies and gentleman, the changing nature of our engagement with India is a tribute to the hard work in both our governments and our private sectors, but it also reflects a fundamental transformation in the world around us.

We’ve moved from a transatlantic century to a transpacific century in which the rise of Asia has already started to define the 21st century. India of course plays a critical role in Asia’s ascent.

It is no coincidence that other large Asia-Pacific democracies -- Japan, Australia, and South Korea -- are also engaging more closely with New Delhi and cooperating more systematically on security issues. And it is no coincidence that the President began his trip of four Asian democracies with a three-day stay in India.

It is natural for India to "look East," where its soft power -- long visible everywhere from the temples of Angkor Wat and Bali to the global reach of Bollywood -- is increasingly complemented by its economic power.

Widening economic interests have reinforced India's readiness to share responsibility for securing Asia, for safeguarding the sea and air routes on which much of the global economy depends. And it is very much in the American interest for India to build on this role in the years ahead.

Indeed there is growing recognition and appreciation of what some might call the India model. Former National Economic Council Director Larry Summers in a speech last October praised the “idea of a democratic developmental state, driven not by a mercantilist emphasis on exports, but a people-centered emphasis on growing levels of consumptions and a widening middle class. “

This India – an India that has begun its extraordinary rise while embracing the humanity of Mahatma Gandhi and the many attributes of a diverse, pluralistic democracy -- today grows 8-9% annually, boasts unique and world-class industries, and is home to two of the top five richest people in the world. Forbes included 49 Indians in its 2010 list of the world’s billionaires, 5 of whom are in the top 50.

But it’s only been in the last twenty years that India’s economy has taken off, thanks to a transformation – two decades ago this year – that allowed the largely protectionist import-substituting economy of India to embrace private ownership, innovation, and trade as key components to its future prosperity and geopolitical heft.

India faced a serious balance of payments crisis in 1991 and was traveling on an unsustainable path towards bankruptcy. As part of an IMF bailout, India was forced to make economic reforms.

The person charged with crafting and implementing those changes was none other than Finance Minister Manmohan Singh – now, of course, the honorable Prime Minister of India – who skillfully carried out the necessary major reforms, dismantled the License Raj, and opened up the economy to foreign direct investment, setting India on a sustainable course that has done more than anything else to make India a global leader.

The results of then-Finance Minister Singh’s reforms speak for themselves. India’s GDP is ten times what it was twenty years ago. What was then a closed economy – errantly trying to rely on only its own finite resources – ­­is now our 14th largest trading partner with the potential to become one of our largest and most diverse commercial allies in the world.

It’s not only the pace of India’s growth, but how India is growing – India has not followed the typical pattern of economic growth, from agrarian-to-industrialized-to-services economy. Instead, its recent economic development has been driven by a technologically-advanced services sector, driven by innovation, education and free markets.

Ladies and gentleman, the past is prologue. While it serves us well to remember how India got to where it is, it is the present and future that I’d like to discuss with you today. Here are just some of the staggering statistics and projections that illuminate the potential for India’s further economic explosion:

India is the world’s second fastest-growing major economy today and is projected to become the world’s third largest economy in the year 2025. It will also soon be the world’s most populous country. And it is a young country. At a time when much of the industrialized world faces rapidly declining birthrates, half of India’s population is under the age of 25.

According to a recent McKinsey’s report – which I recommend to every graduate student here tonight -- entitled India’s Urban Awakening, here is what India will look like in 2030. Over the next 20 years, India will:

· Have 590 million people living in urban areas.

· 91 million urban households will be middle class (up from 22 million today).

· It will construct 700-900 million square feet of office space (approximately the size of Chicago).

· It will pave 2.5 billion square meters of roads and tunnel 4,600 miles of subways and metros – the distance from New York to Kiev (20 times the capacity added in the past decade)

· It will pump and sanitize water; electrify with nuclear, clean, and alternative energy; provide telecommunication services to the 68 cities in India with one million plus people.

India is committed to spending $500 billion by 2012 and investing $1 trillion in India by 2030; private industry estimates India’s need may even exceed these figures.

Indian officials and private sector experts readily admit the plan to spend $500 billion on infrastructure by 2012 may fall short. But even if India misses its target, the Indian government will have spent more on infrastructure than ever before and India will have taken an ideological leap by embracing the public-private partnership model.

Prior to 2007, there were no public-private partnerships for infrastructure development, but today the Indian government predicts that more than one-third of infrastructure investment is financed through PPPs.

As you can clearly see, India presents fantastic opportunities for U.S. companies to provide the goods and services needed to build its railroads, airports, power plants, and fiber optic cables to facilitate India’s rise.

And, I assure all of you here tonight, that U.S. is making it a priority to work with our private sector to give them the opportunities to help meet India’s growing needs. Over the last decade, India became our 14th largest goods trading partner and we exchanged $37.6 billion in goods in 2009. U.S. foreign direct investment in India reached $16.1 billion in 2008, a 10.8% increase from 2007.

Not everyone in the United States is as optimistic as I am today about the rise of India. Television shows like “Outsourced” and the often heated rhetoric on Capitol Hill might lead you to think that India’s tremendous and swift rise as an economic power has come at the expense of American jobs.

The numbers, however, show otherwise and speak to increasingly balanced trade and investment relations between the U.S. and India. During the President’s visit to India in November, trade deals were announced that exceeded $14.9 billion in total value with $9.5 billion in U.S. export content, supporting over 50,000 U.S. jobs. And India is a notable source of foreign direct investment into the United States, with $4.5 billion FDI into the U.S. in 2008, up 60% from the previous year.

Also, with a market of 1.2 billion of the world’s consumers, and per capita incomes forecasted to grow at a rate of 8 percent over the next several years, India’s market offers tremendous opportunity to U.S. exporters of goods and services. 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. From 2002 to 2009, U.S. services exports to India more than tripled, increasing from $3.2 billion in 2002 to more than $9.9 billion in 2009.

And surely, we would all agree that increasing exports to India has benefits for our local economies here in the United States, as well as our overall, national economic strength. In every year for the past 10 years, exporters in all 50 states and the District of Columbia have reported exports to India. In 2009, more than half of U.S. States (29 total) reported merchandise export shipments above $100 million.

Let me conclude with some thoughts of what India’s economic rise will mean to you.

The Opportunity

I think it is safe to predict that Americans like all of you will enjoy progressively greater interconnectivity with the entire Asian continent. Already we are seeing that joint medical and technology advances can be shared by Americans and Indians together, the product of joint collaboration and support from our private sector firms, as well as our governments.

On trips to Mumbai or Delhi, I’m often astounded at how many U.S. citizens live and work across myriad sectors; likewise, go into any corporate boardroom or small business and the likelihood you’ll see an Indian American in an important role is ever growing.

We’ve marked greater business-to-business collaboration than ever before.

From the small-and-medium enterprises to the Fortune 500 companies—all are eager to reap the mutual benefits of new ideas and new markets. And we’ve expanded our diplomacy—opening the doors to new areas of collaboration between our two governments.

On the economic front alone, we now have wide government-to-government interaction to help catalyze closer collaboration and new bilateral business opportunities. Through the Economic and Financial Partnership, the Department of the Treasury and the Indian Ministry of Finance collaborate on key policy issues and advocate for fiscal policy reforms.

The U.S. Trade Representative’s Trade Policy Forum encompasses a number of sector-specific dialogues, Commerce’s Commercial Dialogue facilitates an open dialogue about trade, and the High Technology Cooperation Group has enabled both governments to significantly reduce barriers to trade in sensitive, cutting-edge high technology.

Our two governments also created in 2005 the U.S.-India CEO Forum, which comprises ten selected CEOs from both countries, who have developed a road map and set of recommendations for further reforms to the President of the United States and the Prime Minister of India. All these efforts ensure that our government-to-government interactions are informed by and directly serve the interests of our business communities so we can create new commercial and investment opportunities to create new jobs and opportunities for our people.

India and the U.S. in the Future

If we take a step back and think about the foundations we are laying now for our future cooperation in the key areas I have talked about, it is clear that building a strong economic plank is necessary in building a strategic partnership for the future. We have strong foundations to build on.

We envision a relationship where together both countries capitalize on our complementary strengths as knowledge and innovation hubs, to expand opportunities for engagement between our private sectors, academia, and scientific and research communities.

I would also hope that India takes a look at its own economy, and concludes that it could go further. I have been encouraged by recent press reports about the imminent opening of the multi-brand retail sector to foreign investment. I hope that the government realizes that further openings, such as in agriculture and defense sectors, would benefit Indian consumers and its economy.

Our governments need to match the ambition of our businesses. Washington and Delhi must serve as catalysts for growth and innovation, not stifle entrepreneurial spirit with overbearing bureaucracies. While the U.S. develops a long-term approach that expands the opportunities for our private sector, we have taken note that the EU is negotiating and Japan concluded free trade agreements with India.

They see that the strategic position of India necessitates a grand economic vision to overcome the obstacles that currently exist in the Indian market. The India Model has provided such monumental gains for its people over the last twenty years, and hopefully, going forward, its progress heretofore will be enhanced by a future economic agility – where India can further capitalize on its growing middle class, knowledge-based society, and its rock-solid democratic principles.

Let me conclude where I began. I have appreciated the opportunity to elaborate why President Obama’s trip to India will be remembered as a key turning point, when the U.S. and India embarked for the first time on concrete initiatives to develop our global strategic partnership.

This full-spectrum collaboration that I discussed promises to provide mutually inclusive growth and innovation for the people of India and the United States, and to deliver pioneering solutions and opportunities for millions of others around the world.

In a recent article in Foreign Affairs, Secretary Clinton wrote that “Today's world is a crucible of challenges testing American leadership. Global problems, from violent extremism to worldwide recession to climate change to poverty, demand collective solutions, even as power in the world becomes more diffuse. They require effective international cooperation, even as that becomes harder to achieve. And they cannot be solved unless a nation is willing to accept the responsibility of mobilizing action.”

The Secretary’s words succinctly summarize why the U.S.-India partnership matters more than ever to the world. As two of the world’s leading democracies and market economies, as countries who are committed to promoting pluralism, diversity, tolerance, enterprise, innovation and opportunity, and as countries who are willing to take responsibility for mobilizing responses to the world’s challenges, the U.S. and India together can together profoundly influence the future of our peoples as well as the course of this new century before us.

With that, I’d like to thank Syracuse University for hosting me today, and I would be very pleased to take any questions and hear your comments, including on Central Asia.



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