PM assures foreign investors that economic reforms will continue

Prime Minister Manmohan Singh today assured foreign investors that the process of economic reforms in India would continue and said they need not have any doubts on that score.

"The economic reforms of the past have brought us advantages and I can assure you that we will continue down the road," he told members of the United States-India Business Council (USIBC) in Washington on the second day of a four-day visit to the US.

"We might do it gradually, and in a manner which builds a consensus for economic and social change. But I assure you we will persevere," he said.

Dr Singh said his Government planned to push ahead on key reforms in several areas, especially those aimed at bringing the deficit under control while ensuring a strong expansion in investment in infrastructure.

He said tax reforms, especially the introduction of a Goods and Services Tax, were a very important part of the agenda, as were financial sector reforms.

The Prime Minister said his Government was also committed to major reforms in education and skill development. He told the gathering, consisting of leading American businessmen and officials, that the Government had started a programme to raise resources by sale of equity in public sector reforms. Legal reforms aimed at reducing delays were another key priority, he said.

He said the Governments of the two countries attached a high importance to the role of the private sector. US President Barack Obama and he had reconstituted the Indo-US CEOs' Forum, with Mr David Cote and Mr Ratan Tata as co-chairs, he said.

According to him, the forum would provide a platform where representatives of the private sectors of the two countries could submit joint recommendations to the two governments on ways of enhancing private sector cooperation between the two countries.

Dr Singh said American business had played a vital role in transforming the Indo-US relationship into a strategic partnership between the world's oldest democracy and the world's largest democracy.

He invited American businessmen to stay engaged with India as it transformed itself from a low income country into a vibrant market of over a billion people, with steadily growing purchasing power.

Dr Singh, who is due to meet President Obama for formal talks on Tuesday, said he was looking forward to the discussions.

He said that, in today's economically integrated world, economic relationships were the bedrock on which social, cultural and political relationships were built. He also said that a strategic relationship that was not underpinned by a strong economic relationship was unlikely to prosper.

"On the other hand, a web of economic relationships intensifies both business-to-business and people to people contacts, promoting a deeper and better understanding between countries. That is the kind of relationship we wish to see with this great country, the United States," he said.

The Prime Minister said India's new and evolving relationship with the United States was in many ways the natural consequence of changes in economic policies and business practices that had occurred as countries responded to the process of global economic integration.

He said India’s policies had also changed in the process, making its economy much more open to trade and investment, and more closely integrated with the world economy. He said there was no doubt that these policies had yielded handsome benefits for India.

He said that in the five years before the global crisis of 2008, India's economy was growing at an unprecedented rate of 9 per cent per year on average in the last five years. India began to be perceived as one of the fastest growing emerging market economies and became an attractive destination for foreign investment as well, he said.

Dr Singh said most of the large American corporations were now present in India as foreign direct investors. Many were engaged in high technology work, with their Indian operations forming part of their global supply chains and US business in India had also groomed managerial and technical talent which they have liberally used for their global operations, he said.

Similarly, he said, several companies had located their research facilities in India, attracted by the availability of high quality scientific talent at relatively competitive costs. In recent years Indian companies in sectors ranging from automobile components, tractors, pharmaceuticals and software have also been investing in the US and creating thousands of jobs in that country, he said.

"This two-way flow illustrates the mutually beneficial nature of our evolving and growing relationship," he remarked.

Dr Singh said India's engagement with the US had been expanding on many fronts, throwing up new business opportunities. He said the civil nuclear cooperation agreement was a landmark in Indo-US relations and acknowledged the very supportive role American business played in persuading US Congress to support this important initiative.

"We are currently finalizing the details that will make the agreement fully operational. Once that is done, it will remove restrictions on the flow of technology in nuclear and many other areas. This will open a large area of commercial opportunities for US business in India. We have an expanding area of defence collaboration including the possibility of procurement of defence equipment from the US," he said.

He pointed out India's domestic private sector defence suppliers were now allowed to have upto 26 per cent foreign investment, opening a new avenue for Indo-US collaboration in defence-related activities.

He said India was not only working with other countries to meet the challenge of climate change but also addressing the problem domestically through a National Action Plan for Climate Change, which outlined many new initiatives in energy efficiency and clean energy.

"These are areas where your companies are leaders in the industry, and we should explore possible areas of cooperation. We plan to sign with the US Government tomorrow a Memorandum of Understanding on Energy Security, Clean Energy and Climate Change. This will provide a framework for pursuing bilateral cooperation in specific areas," he said.

Referring to the global economic and financial crisis, he said there were two fallouts which had implications for Indo-US relations.

"The first arises from the recognition that managing a highly integrated global economy requires coordinated and collective action on a global scale. After the Pittsburgh Summit, the G-20 has become the premier forum for international consultation and dialogue. As members of this group, our two countries will have the opportunity to cooperate in addressing all the critical issues now facing the world economy.

"The second is the recognition that the large dynamic emerging market economies of the world are now significant players in the global economy. They are expected to grow faster than the industrialized countries in the years that lie ahead. This will gradually increase their share in the world economy and also increase their contribution to global growth. India today is the second largest of the dynamic emerging economies," he said.

He said the crisis had affected India, with its growth rate decelerating to 6.7 per cent in 2008-09 and likely to remain at around 6.5 per cent in the current fiscal year. He said the country expected to accelerate from this level and get back to a growth of around 9 per cent per annum within two years.

"There are a number of reasons why I believe the Indian economy will resume rapid growth despite the fact that slower growth in industrialized countries will limit our export possibilities. Our domestic savings rate has increased very substantially and supported an investment rate of 39% of our GDP in 2007-08, most of it being in private investment. We have ample human resources in terms of labour skills, scientific talent, and management capability.

"Looking ahead we enjoy a demographic dividend in terms of a growing working age populations in a world that is aging very rapidly. We have a vibrant and innovative private sector, which operates independently of our government. Rapid and inclusive growth in the years ahead will enable us to achieve our social objectives. It will also result in a few hundred million people entering the Indian market for a wide range of consumer goods," he said.

According to him, American companies interested in global markets would be well advised to look at the emerging possibilities on the horizon in India.

He said that a major weakness that limited India's growth possibilities was inadequacy of hard infrastructure. He said the country needed massive investment in energy, transport and urban infrastructure to be able to support a high rate of economic growth. Expanded investment in these areas will help offset weak export demand by providing a domestic demand impetus to support higher rates of economic growth.

The Prime Minister said the Government had taken a number of steps to improve the processes of project approval and implementation. He invited American business to look at the large number of public private partnership projects in infrastructure being promoted by the Central Government and individual State governments in India.

He said India welcomed investment in other areas also, including agriculture-based businesses such as post-harvest segments, including cold chains, agricultural marketing and food processing, manufacturing and mining and services such as financial services, retailing and tourism.

NNN