Manoj Joshi presented the following Keynote address at ACWA's November 29, 2007, Formal Evening Program.
It is my pleasure to address this gathering of the Akron Council on World Affairs and would like to thank Ms. Jane Snider for inviting me. I have come from one of the most exciting places in the world today – India. I would like to talk to you about India, its economy, its cultural and religious diversity and also about growing India-US partnership both between people and businesses and between the two Governments.
India is a young nation but an old civilization. The Indus Valley Civilization is 5000 years old and the current Indian civilization is 3000 years old. India has many religions, including Hinduism, Islam and Christianity. 14% of India’s population is Muslim, 2% Christian and more than 80% Hindu. India is the second largest Muslim country in the world. India has 18 major languages and more than 400 dialects.
India has a long tradition of tolerance for diversity and respect for differences. In today’s world, respect towards people whose beliefs are different than you and tolerance are very much required. These are the foundations of Indian nation, both in political and cultural terms. With such diversity, democracy is the only viable form of government for us.
Indian democracy is only 55 years old but has developed deep roots. India is a federal country with clearly demarcated roles for federal and state governments. We follow parliamentary democracy both at federal and state level. Elections are held every five years and more often than otherwise, one sees the ruling governments changing at both state and federal levels. There are multiple political parties and we have moved to the period where different political alliances form governments. In a plural society, such form of government provides opportunity to all sections of the society to have say in the government formation.
India is a liberal, secular, democratic country. The pillars of our democracy are executive branch, parliament, independent judiciary, independent regulatory institutions like Election Commission and media. Each one of them is essential for effective functioning democracy. India follows common law legal system inherited from the British. Indian courts have the right of judicial review of administrative action as well as of laws passed by the legislature. Free press provides us insurance against excesses of both government and private enterprise.
Family is the foundation of Indian society. We are very religious people, whichever religion we follow. Culture and religion are bound with each other in such a manner that you cannot distinguish on from the other. It is the moral fabric based on our culture, religion and family values that is India.
What are our biggest strengths in economic field? Entrepreneurship of our people; desire of parents to give best possible education to children, they save a lot for that; and the desire and ability of ordinary people to make things happen on the face of insurmountable challenges thrown by the society and nature.
54% of India’s population is below the age of 25 providing a tremendous demographic dividend to India. The size of working population exceeds dependent population and would remain so until 2025 or perhaps until 2045. In order to reap the benefits of the demographic dividend, it is essential for India to impart quality education and skills to these people. Substantial expansion and reforms in the education sector in India would be needed on an urgent basis.
India is still a developing country despite recent economic advances. Our per capita income has now increased to $1,000 per year with GDP of close to $1 trillion. Large number of people still earn less than a dollar a day. We are seeing large scale migration from rural areas to urban areas and growth of large cities.
Our biggest challenge is to make growth inclusive; to make it reach poor people in villages, across the regions. In a rapidly growing democracy, there could be no bigger challenge. Any policy of the government that cannot bring good to voters cannot succeed.
Agriculture employs almost 60% of the population while its share in GDP is only 18% and growth rate is very low. Enhancing growth of agriculture sector is vital for India for ensuring food security, poverty alleviation and overall inclusive growth.
Keep in mind that poor people, including those in villages are also consumers, though the type of goods and services they consume are different. Most economic benefit to the poor people could come if goods and services could be supplied to them profitably. There are many examples in India where this has worked such as micro credit to poor people, supply of services and housing in slums, selling 2-3 cent sachets of washing power and other goods, cooperative dairy movement in India whereby they buy milk from people owning only 2-3 cows, cell phone proliferation amongst hawkers and fisherman, etc.
Energy is going to be one of the most important issues for India in medium to long term. India’s economic growth is far less energy intensive than some other countries. Nevertheless, our energy requirements are bound to increase with economic growth, particularly considering the fact that per capital electricity consumption and oil consumption in India is one of the lowest in the world. We are committed to improve energy efficiency of our economy and also to reduce carbon intensity of our growth.
Inadequate infrastructure is another critical barrier to our growth. Government has projected an investment requirement of $492 billion in next five years in infrastructure sector which would involve investment from public and private sector as well as PPPs in roads, power, ports, railways, telecom etc.
Civil aviation sector in India is growing at more than 30% per year with the entry of a large number of private budget airlines. This is putting pressure on our airport infrastructure and the Government is trying to improve airport infrastructure through increased Government investment, public private partnerships and new Greenfield private airports.
Indian seaports are also attracting private investment in new private container terminals and port operational services. A large number of private sector ports are also under various stages of development.
India is developing nine coal-based Ultra Mega Power Projects of 4,000 MW each under private sector. Government of India is also developing four and six lane highways across the country through PPPs and Government investment. A large number of special economic zones are being developed in India in private sector to provide quality infrastructure for domestic and foreign investment. We hope through these and other measures, India would be able to improve its infrastructure in the coming years.
India-US relations have reached a level not seen earlier. US is our largest trading partner and the largest source of investment. Last year 83,000 Indian students came to the US Universities for higher studies. For the last few years, India has been sending the highest number of foreign students to the US Universities. There are close to 2.6 million people of Indian origin in the US.
India and the US also have a strong partnership in services sector providing benefits to both the countries. Now the Governments of the two countries have brought our relationship to new heights. We are working together in areas of energy, including civil nuclear energy, defense, climate change, science & technology and trade and investment.
The two largest democracies of the world share a vision for the world based on democracy, free market and respect and tolerance towards religious, racial, ethnic and other differences. Indians have one of the most favourable impressions of the US. President Bush has higher approval rating in India than anywhere else. Indians look at the US as a model of free market democracy that is based on merit and provides equal opportunities to everyone to realize their dreams.
India’s imports from the US in 2007 were $12 billion increasing by 25%; India’s exports to the US were $21.8 billion increasing by 16%. Indian imports from the US are mainly technology items, defence industry items, aircrafts etc. India’s exports to the US are dominated by diamonds and jewellery, textiles and other manufactured items. Indian agricultural imports are rising, due to higher food consumption by rising population and increasing purchasing power. Our main agricultural imports are pulses/beans, edible oil, mainly palm oil and soybean oil and wheat. We would like to increase our agricultural imports from the US, which should be of interest to Ohio.
Bilateral investment between India and US is increasing. Most of the US investment is taking place in services and research areas as well as through private equity, hedge funds, venture capital funds and through other financial institutions in the Indian companies. Most of the large US companies have presence in India. Indian companies have also invested $6 billion in the US. Indian companies have bought a number of US companies in steel, aluminum, hotel, pharmaceutical, software and engineering sectors providing jobs to 40,000 people.
One of the most successful initiatives between India and US is CEO Forum wherein CEOs of leading Indian and US companies are working together in advising the two Governments in taking measures to increase bilateral trade and investment relationship. India US defence cooperation has increased substantially with US companies looking at increased Indian defence purchases. We are also working together in various bilateral government to government fora in the areas of space, bio-technology, energy, trade policy, agriculture and financial services.
India and US both are at the receiving end of terrorism. India has been facing this problem for more than 20 years. We understand the problems that the US is now facing. India lives in a difficult neighbourhood which has limited democracy, problems of terrorism and poverty. We are committed to work with the US and other countries in countering the threats of global terrorism. We believe this is a difficult battle which needs to be fought at many fronts and for a long time. Our common threat perception in this rising world of intolerance has brought the two countries closer.
India and the US are very different countries; India is a poor country while the US is one of the richest countries in the world. However, both of us are countries with pluralities with diversities in religion, race and languages. We are the largest democracies in the world with liberal secular policies and free market economies based on rule of law. We are committed to work towards a more tolerant world where democracies respect differences in ideology, race and religion and work towards a more prosperous and sustainable world.
India’s Finance Minister recently said, and I repeat:
“India is poor rich country. We are rich because of natural resources but poor because we are unable to exploit those resources profitably and efficiently. India is rich because of its entrepreneurial talent but it is poor because of hurdles in the way of entrepreneurs through policy and procedures. India is rich because of its young population but poor in terms of delivering quality education to them. India is rich because of its modern pharmaceutical industry and traditional system of medicines but poor in terms of delivery of basic medical services to its poor. India is rich because its people and businesses save and invest but poor in terms of delivery of services by Government to people. India is rich in terms of values and moral standards of its people but poor in terms of declining standards in public life. India is rich because its people are hard working, resilient and pragmatic but poor in terms of making those people a part of modern global economy. India has discovered virtues of an open polity and an open economy. The younger generation in India is optimistic of economically doing well and to eliminate the scourge of poverty and make India rich.”
Indian economy today is growing at the rate of 9.4% a year. In the last four years, India’s GDP increased at an average rate of 8.6% a year. India is now the second fastest growing economy in the world and the fastest growing free market democracy.
India followed a path of Fabian Socialistic Economy since 1950s with state playing the dominant role. Since 1991, India started liberalizing its economy both domestically and at external front. India’s peak customs duties, which were 150% in 1991, have now been reduced to 10%. Almost all the sectors of the economy have now been opened for foreign investment. Domestic taxation levels, both direct and indirect taxes have also been reduced substantially.
We witnessed an unleashing of Indian enterprise in this past decade. Large Indian corporates have gone global. SMEs have become more competitive. The new generation of local enterprise has burst forth on to the business stage. These ‘children of reform’, who have benefitted from our ongoing liberalization and reform program, are the vanguard to a new India, an India that is prosperous, an India that is equitable and an India that is a just society.
Indian economic growth, as in the US, is primarily driven by domestic consumption. This high domestic demand has attracted large domestic and foreign investment. Last year foreign investment in India increased to $19.5 billion. Foreign Institutional Investment in Indian stock market in this calendar year increased to $13.2 billion. Both domestic and foreign companies find Indian operations very profitable. Our stock market has now reached its highest levels. The market capitalization of listed securities has increased to $1.5 trillion, larger than the size of the Indian economy at $1 trillion.
Indian companies are increasingly investing abroad. Last year, our global investments were more than $11 billion. Indian companies are buying foreign companies in steel, aluminum, oil, pharmaceutical, engineering, hotels and information technology sectors.
Last year, Indian global exports were $127 billion and imports were $192 billion; growing at close to 25%. India’s services exports, at $81.3 billion are fast catching up with the country’s merchandise exports. The services export growth rate last year, both for IT services and other services, was 32.5%. Our capital and current account inflows and outflows together account for nearly 106% of the GDP. We are fast globalizing.
Reduced tax rates and high growth in the economy have led to 38% increase in tax revenue last year for federal government. This is helping in providing higher allocations for social sectors such as health and education and infrastructure investment.
Middle class in India is growing and some estimates suggest that it is 300 million strong, larger than most countries. This middle class, with increasing income levels is buying more consumer durables like TVs, computers, automobiles, cell phones and telecom services, software, financial services, etc. India is now the fastest growing telecom market with more than 7 million new subscribers being added every month. India is also the second fastest growing automobile market. India offers vast opportunities in manufactured goods, services including financial services and infrastructure sector to the US companies to cater to this rising demand.
In the last 10 years, modern information technology and related services sector in India has grown manifold. In 1950s and 60s, India had started a number of Indian Institutes of Technology, government engineering colleges and Indian Institutes of Management. These colleges attract best of the students in India. A number of students from those colleges came to the US for higher education and settled here and participated in developments of IT and technology industry in the US.
In 1990s, a large number of private engineering, medical and managements colleges were started in India. Now more than 400,000 students graduate every year from these colleges. This vast pool of skilled manpower, along with modern communications technology contributed to the development of information technology and outsourcing industry in India. These industries and their employees are consuming more computers, air-conditioners, TVs, cars and other consumer items, both imported and domestic.
Indian industry has now finding its niche in high tech manufacturing in a number of sectors such as pharmaceuticals and auto-components. Some of our fastest growing sectors of our economy are retail, real estate development, entertainment and media, financial services and IT and IT enabled services. India has seen large investment coming in research and development of products and services. Product development, development of new drugs, clinical trials and research in software and financial products and services are increasing in India with rising foreign and domestic investments.
We have very good patent and copyright protection regimes. India industry has large financial interests in protection of intellectual property developed by them; be in the area of films and music, software or pharmaceuticals. This coupled with our vast pool of scientific and technological manpower would see greater growth in these sectors in the coming years.
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Manoj Joshi visited Akron, Ohio, at the invitation of the Akron Council on World Affairs (ACWA). He provided a formal briefing session for high school students participating in ACWA's award-winning Global Scholars program. Students attending the briefing prepared in advance with study materials based on four current India issues. Mr. Joshi was the guest speaker at ACWA's evening "Dialogue with the Speaker" program. ACWA arranged a meeting for him with executives from manufacturing companies and economists in the Northeast Ohio area, to discuss business opportunities.