SPEECHES AND REMARKS 2006

As prepared for delivery

Address by
David C. Mulford
U.S. Ambassador to India
to the Business Development Summit
Mumbai, India
November 29, 2006

Good morning. Minister of State Kumar, Commerce Secretary of the Government of India Pillai, Undersecretary of Commerce of the United States Lavin, President of FICCI Poddar, and President of CII Sheshasayee, ladies and gentlemen, I welcome you on your visit to Mumbai - many, I understand, for the first time.  Mumbai has been a central trading hub for centuries, yet it is still a magnet for growing trade and commerce.  It is also India's financial center and will emerge over time as an important global financial market.

America's commercial ties with India go back for centuries as well; starting with George Washington's nomination of Benjamin Joy as Consul in Calcutta in 1792.
I applaud the number of small and medium sized US companies that have come to see for themselves the economic promise that India holds.
 
During your visit, especially during the next few days, you are sure to hear much about that promise, as well as the challenges that come with it.  While I have this time with you, I wanted to share my perspective on what it means to be in India right now and the challenges and opportunities that await you.  In doing so, I want to step back a bit from the day to day realities in front of you, and comment on the political economy that shapes those realities.

My theme is that it is the right time to be in India.  We have gathered here as another new high point in the Indo-US relationship is achieved.  Two weeks ago, the Senate--with striking bipartisan support--overwhelmingly passed the US-India Civilian Nuclear Agreement legislation.  The debate in both the Senate and the House brought out the best in our legislators as they captured the shared awareness of Americans that India has become a critically important strategic partner of the US and is a proponent of peace and stability in the world.
 
It is the right time to be in India on the eve of the creation of a world industry in civilian nuclear energy production, where India's talented scientists and engineers will work with Americans and others to develop the energy base needed to literally power this country forward in the 21st century.  Roughly 30 of you here represent firms that are poised to bring state-of-the art nuclear technology and commercial know-how to this sector.

It is the right time to be in India -- to share in the blossoming of our two countries' relationship and the transformation of India's economy from closed and protected to one that seeks to meet the rest of the world as consumer, producer, and investor.  This has been impressively underlined these last six months when for the first time and despite rising foreign investment into India, acquisitions by Indian firms outside India have outpaced incoming flows.  This marks, in my view, the beginning of two-way investment between our countries that will supplement our rapidly growing two-way trade.  

You may have heard about the World Bank's global rankings on the difficulties of doing business around the world.  India often stands in the middle or near the bottom of these business league tables.  These indicators are not without meaning, but they are lagging indicators and India is changing.

For decades, government in India had the responsibility of deciding and shaping the growth model for India's economy, trying to ensure that India's poor shared in any rising tide.  But the unintended consequence of what became known as the license raj was to repress entrepreneurship and severely limit the opportunities for India's poor to better their lives.

Now, these past 15 years, there are increasing adherents across India's vibrant political spectrum who understand that growing the pie is as important as dividing up the pie and that the private sector has a decisive role to play in inclusive economic growth.  That realization has enabled foreign companies entree to many areas of India's economy. 

But the respective roles of India's public and private sectors are still being negotiated.  While the private sector's potential is now widely recognized, there is still an urge to protect poorer India against the world.   The debate goes on: how much should the private sector--especially foreign private companies-- be trusted to add value to India's diverse society?  How much foreign participation should be allowed in this emerging economy and what should be the rules of entry? 

And so hurdles and problems exist--from complicated tax administration laws to labyrinthine bureaucratic processes--and these are not always transparent at the beginning of one's foray into India.

Some of you will be going on to other cities, which I highly encourage, so that you may see the India outside Delhi and Mumbai.  India is a federal union of 29 states and 6 union territories.  It is important to understand that economic growth has been uneven across these states and territories, with varying degrees of both good governance and reforms.

These challenges mean that business engagement with India is not a journey for the faint-hearted or for those who expect overnight success.  Success in India demands long-term commitment and the patience, the vision, and a strategy to succeed.  But the journey will be rewarding for those who make the effort and especially for those who approach India as a locus for future-looking global business. 

A critical mass of India's own private sector has already decided it can play a vital role in the transforming public/private relationship.  India Inc., instead of spending its entrepreneurial energy exploiting or avoiding the license raj stranglehold of yesteryear, is re-channeling its innovative spirit into the development of sophisticated technologies, new products, new markets, and new partners -- driving India's rising economic growth.

This newly focused entrepreneurialism first gained world attention in India's renowned IT sector, but is increasingly seen in the manufacturing sector, in pharmaceuticals and life sciences, and in services like telecom and tourism, which are all experiencing growth records. 

It is also apparent in Bombay's surging stock exchange, whose benchmark index has risen from 4500 in early 2004 to a recent high of 13700.  Foreign investors increasingly play a role in this growth, but Indians still provide the majority of investment, demonstrating homegrown confidence in India Inc's trajectory.

At the same time, economic growth has boosted per capita income from $470 in 2000 to $714 in 2005, a 55 percent increase which has multiplied purchasing power across the country.  This in turn has created world-class markets from the largest number of annual mobile phone sales in the world to potential consumer markets in rural India where more than 700 million people live.

Meanwhile, India's government has identified the need through both public and private investment to focus on 3 critical areas--energy, infrastructure, and agriculture.  These are compelling fields for collaboration between American and Indian firms.  India's leadership has recognized that the scale of these needs is enormous--estimating infrastructure investment requirements at more than $300 billion over the next five years--and they understand that all three areas must have private sector participation to meet the challenge.

Growing economic ties between the US and India reflect more than simply the economic opportunities available to American companies in the Indian market.  There is also a keen understanding of the benefits that close collaboration with globally competitive US firms can bring in world markets. 

American businesses, unfettered by a legacy of state micromanagement, begin and grow in an environment of heightened competition that demands strong management, technology skills, and deep understanding of customer service and of changing markets.  Many Indian companies recognize these business assets and seek out partnerships that help them mature as globally dynamic firms.

American sectoral expertise from clean coal technology to power transmission to dynamic and responsive capital markets can also play a role in developing the 21st century infrastructure India needs to sustain its growth momentum and bring growth to all corners of India.

The CEO Forum--formed last year by President Bush and Prime Minister Singh with 20 CEOs from prominent Indian and American companies--is one forum that enables and amplifies the collaboration that American and Indian companies can achieve together.  The Forum is the forerunner to both new companies coming in and companies already in India expanding their investment.  The focus is on practical approaches, lessons learned, and best practices to navigate the still transforming Indian state and economy that I described earlier.

Just as the Forum brought Indian and American CEOs together, I urge that all of you use this historic conference to do deals, form partnerships, and profit from the opportunity for frank dialogue with Indian government officials.  You will need a strategy--a long term view--patience and persistence. But one of the world's great markets is here.