Dean Rangnekar, thank you for that kind introduction. I’d like to begin by welcoming members of the many business chambers with us here tonight: the American Chamber of Commerce, the Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indo-American Chamber of Commerce (IACC), and the National Association of Software and Services Companies (NASSCOM). I’m happy to see that so many of you have taken time out of your schedules to discuss this incredibly exciting moment in the economic relationship between India and the United States, and to think about what we can do to make sure that the relationship is working for all of our people.
I’m also happy to see how many students are with us tonight as well since you are the ones who will be leading this relationship in the years to come. Whether you are from the Indian School of Business, the Narsee Monjee Institute of Management Studies, Aurora’s Business School, or the Institute of Management Technology, I know tonight’s event falls in the middle of the exam and job placement season, and so despite the importance of the topic, I’ll try to stay brief!
While all of these are excellent schools, I would like to pause for a minute to acknowledge the accomplishments of tonight’s host institution. ISB’s founding Dean, Dr. Pramath Sinha, happens to be a good friend of mine, and I am simply in awe of how he and all of you managed to create a world class business school in the space of only ten years. I was struck in looking through his book the other day – the aptly titled An Idea Whose Time Has Come – at how from the very conception of the school, Dr. Sinha and his colleagues were determined to build a world-class institution that was also inclusive. This beautiful campus could easily have become just a school for the well-off. The book describes the founders’ early decision that ISB’s admissions process would remain entirely based on merit, and they stood their ground on the issue despite plenty of criticism from the skeptics. Now, with the help of a robust loan and scholarship program, admission is entirely need-blind, and ISB is rated among the top business schools in Asia. I can’t think of any better setting—one that so perfectly merges excellence with opportunity—for the discussion we can have tonight.
These are exciting times for our two countries. I think the historians will look back on this period – and President Obama’s recent visit in particular – as a transformative time in our bilateral relationship. If it seems like half of the President’s cabinet was here, or will be here, that’s about right. These high-level visits reflect the excitement about our deepening friendship and the good path we are on together. Tonight I want to talk about the economic relationship between our two countries, why it matters, some areas where our partnership really has an impact, and some of the challenges that we confront which prevent us from closer economic cooperation.
Common Purpose – Shared Successes
In recent weeks, I have had the good fortune of traveling around India and I have been able to see first-hand the renewed enthusiasm and confidence in the economy, the great potential for US/India business collaboration, and the positive spin-off effects that are possible in both countries. Only a few days ago, I was in Bangalore for the Aero India show – and while it was an impressive display of Indian military power, I was equally impressed with the number of US companies, from the very large to the start-ups, that were already collaborating in India in the aerospace and defense sectors. I was thrilled to see how much trade, joint research and collaboration, and development were taking place among smaller and mid-sized companies too. During the President’s visit, we were able to formally announce four pathfinder projects and two working groups – on aircraft carriers and jet engine technology – under the Defense Technology and Trade Initiative. Who would have believed such cooperation was possible even a few years ago.
I also know that here in Hyderabad, US companies employ several hundred thousand workers, and are involved in every sector of the economy. The joint ventures here, including the cutting-edge defense projects, are well known. Would you have ever thought part of the U.S. President’s helicopter would be assembled here?
When I travelled to Gujarat recently, it was terrific to see first-hand a massive new Ford automotive factory that will produce state of the art vehicles for Indian and the Asian markets, where hundreds and eventually thousands of skilled workers will be employed. The facility gives Ford, an iconic US company, a great platform in Asia, which is not only good for workers in Gujarat, but also for workers in Detroit and beyond. It’s same story with GE. In Pune with the Prime Minister just a few days ago, I was able to tour their new advanced manufacturing facility, where four different product lines would be operated from the same plant, and where 25% of the workforce would be women. As I learned from the GE team, the innovation, research, and development will take place across borders – so while the manufactured part may be from the Pune plant – it’s likely that engineers in Pittsburgh or elsewhere in America – helped contribute to the final design, it’s functionality, and its distribution. That’s how modern manufacturing takes place.
But the economic relationship between our two countries is not just about large companies coming here to build factories. It’s about shared prosperity on all levels. When I was in Kolkata just three weeks ago, I was able to meet with the American founders of Sari-Bari, a for-profit NGO that provides good jobs, education, and training to women who were once part of the commercial sex trade, and who were looking for a better life, a stable income, and good job. Sari-Bari just does that, taking used saris and converting them into handbags, wall hangings, and other distinctive items. They’ve sold goods to major European and American retailers for sale in their stores, they’ve made a profit, and at the same time, they have changed the lives of women who otherwise would not have had much hope. Yes, you can do well by doing good.
Another compelling example involves the United States–India Science & Technology Endowment Fund , a public-private partnership that promotes innovation and entrepreneurship for the public good. Some of the work that we see coming out of this partnership today is extremely impressive. To take just one example, Rajasthan’s JaipurFoot Organization is the largest provider of prosthetic limbs in the world. So, when some engineers at Stanford University thought they had found a way to reduce the price of prosthetic knees from $15,000 and make them affordable to all those who need them, what did they do? They brought their new design to the JaipurFoot Organization, which was able to bring together the experience, technical expertise, and manufacturing capability to create a product that has now been fit onto 6,238 people. Soon, as a result of this exciting collaboration, the price of a high-performance prosthetic knee, typically one of the most complicated and expensive prosthetics to produce, will come down from $15,000 to less than $100.
Hundreds of Indian companies are also operating in the United States and have made significant social impacts with their philanthropic initiatives and community engagements. To take just one example from here in South India, Shri Govindaraja Textiles (SG Mills), is a third-generation, family-owned business. In May 2014, Governor Pat McCrory of the U.S. state of North Carolina announced that SG Mills plans to open its first U.S.-based operation in Eden, North Carolina. The company will invest more than $40 million and create 84 direct jobs and hundreds more indirect jobs in just the next two years, in a city that has suffered through difficult times with the decline of its own industrial economy. Eden has been a proud textile town since the establishment of the county’s first textile mill in 1792. And with its investment in Eden, North Carolina, SG Mills is not just generating employment, but also becoming part of an American town’s story and ability to maintain its traditions.
I could go on, and list the success stories – there are so many of them. We know this is a positive story because the data tells us so. Two-way trade between the US and India has nearly quintupled in the last dozen years from $19 to almost $100 billion. Defense sales have gone from virtually 0 to $10 billion in only a decade. Indian companies now employ tens of thousands of American workers, and US companies employ even more back here in India. But we also know the data shows that we have barely scratched the surface on what is possible. Only 1% of US exports come to India, and only 2% of America’s imports come from India. That’s not enough. And, given the size of our two economies, no one should be satisfied with $100 billion in two-way trade. That’s why the President has called for another five-fold increase – to $500 billion in the next dozen years. We know we can get there and we will try to do so even faster than that.
Why the Partnership Matters
We seek this enhanced economic partnership for a number of reasons. As the President said when he was here, India’s rise is the interest of regional and global stability, and global economic growth. If our two economies are growing together, we can be a powerful engine for prosperity across the globe. Our interests in this region, and across Asia are also aligning more and more. The fact is that Asian economic integration is good for economic prosperity and for stability. Our rebalance to Asia is aligned well with India’s Act East policy. When the countries of Asia are trading and working together in an open, fair, rules-based commercial order – that’s good for society, for working people, and for the bottom line.
But on the micro level too, our economic cooperation is critical to impacting the lives of so many. The fact is our businesses have been closely cooperating for many years. It is through this rich network of commercial relationships, where personal connections are often forged, where trust is deepened, and bonds are established for the long-term. The reality is that businesses and commercial transactions can move faster than governments – and that’s a good thing. With the touch of a key-stroke, deals can be forged, information exchanged, and services provided from New Delhi to New York, Hyderabad to Houston.
But perhaps most importantly, the growth of economic connections between our two countries is good for ordinary people; people who want the same things, whether they are in India or the United States – a good job, a safe community, and the prospect that their children will have a brighter future. All of us know that economic growth rates and statistics alone cannot be sufficient, unless that growth creates the opportunity for a better way of life, and a more sustainable future, including and especially for those at the base of the economic pyramid. As President Obama asked in his annual State of the Union address this year, “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”
This is a question that both of our countries have to answer, but I believe that we can do more to create the kind of economy that lifts our people and reflects our values if we work to build it together. The United States—our companies, our research facilities, and our people—wants to work with the business and thought leaders in India to create innovation-based economic growth that doesn’t just provide worthwhile jobs to the students with us here tonight, but eventually to the employees you will hire and the generations that will follow. We share in the vision of “Sabka Saath, Sabka Vikas,” together with all, development for all.
Going forward, let me mention three areas in particular where we are pleased to be partnering with India: (1) financial inclusion; (2) skills training; and (3) lean energy development.
Economic and Financial Inclusion
In his recent visit here, President Obama commended Prime Minister Modi’s “Jan Dhan” Financial Inclusion initiative, and signaled that America wants to be your partner as you progress toward the ambitious goal of 100% financial inclusion. Prime Minister Modi has rightly noted that “financial untouchability” is a scourge on the poor, and that full participation in today’s economy requires savings as well as access to loans and insurance. Financial exclusion in any form prevents us from reaching our full economic potential. For the land-poor farmer, financial inclusion enhances her ability to smooth out normal consumption and manage life’s risks; while for the new urban migrant, it allows him to take advantage of economic opportunities such as starting or growing a small business. From a broader national perspective, we know that financial inclusion has a direct bearing on economic growth rates and correlates with financial stability and institutional integrity.
When Treasury Secretary Jack Lew and I were in Mumbai two weeks ago, we had the opportunity to visit a Unique Identification Enrollment Center in a small local fishing village. We got to see what it meant to the men and women there, some of whom had no identification documents whatsoever, to finally have access to a modern biometric ID card. We also spoke with women who used their new Aadhaar cards to open up bank accounts and learned what a difference bank access, accident insurance, and an overdraft facility had made in their lives. The scale of these undertakings – 800 million enrolled in Aadhaar so far, and 125 million in the Prime Minister’s Jan Dhan Yojana – is remarkable, and it doesn’t end with banking and insurance. India’s rapid financial inclusion campaign will enable direct benefits transfer and improve the efficiency of vital welfare programs as well.
Already, through the sheer demand that biometrically enabled ID systems have created, prices of Aadhaar-compatible iris scanners have gone down from hundreds of dollars to just $50. Nandan Nilekani, who conceived of Aadhaar and led the effort as its first chairman, foresees a time when even a $100 smart phone will come loaded with an iris scanner, bringing reliable banking services within the reach of everyone.
It is part of President Obama’s pledge of U.S. support for this vital goal, the Government of India and the U.S. Agency for International Development (USAID) are finalizing an agreement to establish a public private partnership with key U.S., Indian, and international organizations to support the Government of India’s efforts to create an inclusive digital economy.
Second, let me just say a word about skills training and education. As President Obama pointed out in his speech at Siri Fort, the majority of India’s people are under 35 years old, and in not too long, India will become the most populous country in the world. This is sometimes referred to as India’s demographic dividend, but cashing in on that dividend won’t be easy. Young people need access to modern skills training and a good education, one that prepares them for good jobs and molds them into responsible citizens.
Today, the State Department is working closely with the Ministry of Human Resource Development to help U.S. community colleges partner with Indian polytechnic schools, improve curricula, and build stronger links with industry. The first American community colleges were established around 1900 at a moment when the United States was itself struggling to train large numbers of skilled workers and improve our higher education system. The concept has evolved over the past hundred years, and their primary feature today is one of openness: providing students with a stepping stone to attain the skills they need, or to reach the highest levels of academic study. They provide students the opportunity to learn new skills, re-enter the education system, and transition between the vocational and the formal education tracks. Working together, our countries can build top-quality institutions to help millions of young Indians get the skills they need to make a stronger India.
Third, I wanted to note a few of our initiatives together in the clean energy arena. During his Republic Day visit, President Obama reminded us that 2014 was the hottest year ever on record, and that India has already started to feel the impact of a warming planet with water shortages, melting glaciers, severe monsoons, and intense droughts. That is why we are committed to support India’s ambitious targets on renewable energy, including its target of achieving 100 gigawatts of solar capacity by 2020. The U.S.-India Partnership to Advance Clean Energy has already mobilized over $2.4 billion to invest in clean energy projects here, and the U.S. Export-Import Bank is ready to make an additional $1 billion available to finance clean energy. Meanwhile, our U.S. Agency for International Development is helping to build the capacity of India’s power grid and integrate renewable energy. And, of course, our breakthrough understanding on civil nuclear cooperation will help open the door to US built reactors helping to provide electricity to the 300 million people who currently go without it.
So, if this is all the good news….what’s the flip side of this story, and where do the pitfalls and obstacles lie? Let me mention a few. India continues to be perceived as a tough place to do business. It ranks, as you well know, at 142 in the World Bank ranking measuring the ease of doing business. Investor confidence is still shaky.
Intellectual property enforcement is perceived as weak. And many sectors still remain closed to outside investors and businesses. We know that the Prime Minister has made rationalization of bureaucratic procedures a high priority on his list of reforms, and we eagerly anticipate substantive progress in this direction. One hotel chain CEO recently mentioned that it takes on average 80 permits to build a hotel in India, but only six in Singapore. Moreover, according to the World Bank, it takes an average of nearly four years to resolve a commercial dispute here—the third longest average in the world—while creditors wait even longer, 4.3 years, to recover funds from a company that’s become insolvent. Indian courts face a backlog of 30-40 million cases nationwide, and companies simply cannot afford to invest in or provide financing for an economy where legal justice comes too late, when it comes at all. As they say, justice delayed is very often justice denied.
Some of these challenges could be addressed by a high-standard Bilateral Investment Treaty, and that’s why the United States remains committed to negotiating a BIT with India. A high-standard BIT will give assurance to those people and companies who want to create jobs and invest in India’s future and it could even lead to a more comprehensive bilateral agreement between our two countries.
And the United States and India have more of a common interest in intellectual property rights than many of you may think. If India wants the best technologies, newest products, and innovations, then it must also be known for the best intellectual property protection regime. This is not only in the interest of US innovators, it’s also in the interest of Indian scientists, artists, and filmmakers, who often lead the world in their respective fields, and who will also want and deserve to have their intellectual property protected. Everyone knows, for example, that India is home to the largest film industry in the world, but according to a report by Ernst & Young, the industry loses about $4 billion a year due to piracy. It’s not sufficient to talk about the importance of innovation, we must also protect it, whether it’s a work of art or a life-saving medication.
Ultimately, questions about the openness of the Indian economy, the effectiveness and efficiency of legal proceedings, the protection of IP, the burdens of licensing or the transparency of government decision-making are questions to be resolved by the Indian people. I would only say that experience tells us that economic reforms, legal certainty, enforceability, and transparency are hallmarks of successful economic systems with high investor confidence, and potentials for growth that will lift more people into the middle class.
Many of you have already heard my father and mother’s stories – which are similar to so many others in this room – they showed up in America with only a few dollars, and with a dream of a better tomorrow. Those dreams of ordinary people exist in both of countries, and it’s up to all of us – the leaders here assembled today – to see that those dreams are given a chance to become a reality. If we do, we can not only help transform the lives of millions, we can also continue to pull our two countries – the best partners — closer together. Both of our countries may face fiscal and economic growth challenges in the coming years, but clearly working together, our economies are stronger than they are by themselves. And so long as there are great institutions like yours, promoting opportunity and achieving excellence for all, I’m excited and confident about our future together. Thank you, and chalein saath saath.