Press Roundtable American Consulate General in Mumbai, India

SECRETARY SNOW: Well, we're having a good visit to India. And we're delighted to be here in Mumbai. We just concluded a very good meeting with Governor Reddy of the Central Bank. Earlier today we met with a group of people focused on private equity in India. Last night we had a good meeting with a group of your CEOs who were the Indian side of the U.S.-India CEO group that will be reporting recommendations and ideas to your Prime Minister and our President for their meeting which is scheduled early next year. We also had a series of meetings with other business leaders from the infrastructure industry, and from the financial side of the infrastructure industry, and meetings with financial sectors - a large number of financial-sector people which has helped give us a sense of your economy, your financial sector, opportunities and issues.

We also had a terrific visit - maybe a high point of our couple of days in Mumbai - to a project that involves moving people from the slums and the streets to real housing. That reflects a commitment on the part of the state, city, and some very enterprising ladies that we were privileged to meet, who are involved in the microfinance business of bringing large financial institutions to make resources available after they have aggregated the commitments of a large of number of small borrowers. And the potential for that kind of entrepreneurship to create improvements in the lives of poor people looks to us to be pretty remarkable, and it's really moving to see these ladies, who now live in better housing, now save, now have passbooks where they keep their accounts, that are now part of the savings process, taking advantage of the compounding interest and all those things. We are now going on to see the Stock Exchange and the Commodities Exchange. I look forward to having a better appreciation of the equity markets as a result.

Our overall impression is that India is clearly on the right path, making progress. Broad-based reforms initiated in 1991, lowering tariffs, engaging the international economy - becoming a larger and larger part of the international economy - now with the external sector some 30 percent or so of the GDP of your country, that clearly indicates that India is on the move, with a growth rate of six, seven, eight percent. They are certainly encouraging, but they are also required to deal with the unemployment situation, which is too high and everybody acknowledges that it is too high. Meeting with the business people, we were struck by the confidence they have - the self-confidence. And the high aspirations. I think Indian businesses made huge strides here in the last ten years or so and today confidently approach the economy of India and the economy of the world, and they are part of what's making India so successful, integrating India with the global economy.

We are here as friends of India. I am pleased to hear, in talking with so many Indian businesspeople and others we met with, the strong ties, the feeling of friendship and warmth that Indians have for America and America has for India. We share so much. You're the largest democracy in the world. You've a deep commitment to democratic values, democratic institutions. The United States is the oldest democracy in the world. Your growth and your rising prosperity are good for you, but it's good for us, too. We want to see India succeed. We want to support India's success. India is emerging as one of the great powers - the great economic powers - of the world. And that's good for the global economy, because the global economy needs more growth. Growth in many of the traditional sources of growth had slowed down. India can supplant that, can help supplement and overcome the weakness in other parts of the world with higher growth rates here. We want to encourage that. As I say, it's in India's interest, because with that higher growth you can deal with the problems that you are confronting of poverty and unemployment. But you also add something to the global economy that needs higher growth rates to deal with imbalances. We see your growth as helping us. As India grows, it becomes more prosperous, its markets, U.S. firms have opportunities. We want to encourage the reform movement. We want to encourage the reform agenda. We talked a lot with the business leaders and the others in the course of our last couple of days, about the importance of the financial sector and continued progress in the financial sector in creating, really, strengths with the economy as a whole - as the financial sector is a sort of a nerve center for any economy. And when it is doing its job of mobilizing capital and moving capital around and making capital available to those who use it best, it becomes a spark plug for higher levels of growth, and we want to engage on that issue with your business leaders and your political leaders and your economic policy leaders because it seems to me it has so much potential.

One area where its potential seems particularly notable is on infrastructure. India, everywhere you go in India, people talk about the need for more infrastructure: infrastructure for highways, infrastructure for power, for energy, and infrastructure for housing, for urban development, airports, airways, ports, the whole range of infrastructure issues is at the forefront of India's future. And investments, good investments in infrastructure build that future, build a brighter, fuller, more complete future. But infrastructure's got to get financed, and further modernization of the financial structure of the country, of the financial sector of the country, will make possible lower cost, better financing, for infrastructure. So that's a subject that we that we continue to come back to and talk about.

Further openings in the financial sector, in pensions and insurance and in banking, will help develop the longer end of the lending. The project financing, which is long-term financing, corporate bond issues, longer-end municipal issues - these projects have a long life to them; they pay out over a long period of time; they need financing that fits those requirements. That's a subject that we will continue to come back to.

Another one, that takes advantage of the infrastructure opportunities, is some improvements in the way that the judicial system works, to expedite dispute resolutions. That's a subject that we want to continue to talk to people about, and it is getting a good response. For many of the people who would be potential investors in infrastructure, that was one of the limitations they faced; one of the concerns they have is the long time it takes to resolve potential disputes. And there is, it seems to me -- there is room here for some focused attention on the dispute resolution process as a way to facilitate capital coming in, foreign direct investment coming in. And India has a good savings rate, they have a high savings rates. Mobilizing those savings to go into the private sector, that finance private sector investments, for a well-functioning financial sector, will also help deal with this set of infrastructure issues. So we're encouraged by what we see. I think that the relations between India and the United States have probably never been stronger, and we're here to underscore the importance that we place on those good relations. Just as the President's visit here in a few months will further underscore the importance of the relationship between our two countries. So with that let me try and respond to any questions.

QUESTION: Could you give us an indication of your talks with the banking regulators, particularly about the issue of the Reserve Bank of India and the role of foreign banks?

SECRETARY SNOW: The bank officials talked about the so-called roadmap, which has significant additional openings. I think it's in 2009, the roadmap proposal, which would widen the scope for non-Indian banks to operate in the Indian, your, markets. That's encouraging; we encouraged it, thought that it's the right way to go. I think larger participation in your markets by non-Indian banks, to complement the Indian banks, will help strengthen your financial sector. I know there is a lot of interest on the part of the non-Indian banks in being bigger players, in opening branches, in spreading financial services throughout the country, and there is a lot of expertise in the Indian banking system. There is a lot of expertise outside, and I think bringing the capital of foreign banks, and the expertise that complement the capital and expertise of the Indian banks, will give you a leg up in your financial service sector that will be a point of strength for India, be a source of strength going forward for the Indian economy. So I am encouraged about the Reserve Bank.

QUESTION: Should one expect any kind of agreement or treaty or a bilateral pact when the president comes, and do you see that happening in your talks with the industry leaders and CEO forum (inaudible)?

SECRETARY SNOW: Of course there is the CEO report which will be forthcoming. The Indian chair is Mr. Tata, the US chair is Mr. Harrison from JP Morgan Chase. I talked to both of them about their report, where they're going with it, and, without breaching any confidences, I think it's fair to say that they're coming together, with a good sense on both sides of the business leaders of some suggestions that would be helpful to strengthen the ties between us, and things that the US could be doing, and things that India can be doing, both of us, to create opportunities for each other that are mutually rewarding. I have great respect for both of those gentlemen, and for the other people on that team of CEOs; they're really first-rate on both sides - first-rate, talented people who have a real understanding of business and finance and economics. I hope their recommendations will get the attention they deserve. I am confident they will. And I think they can be a catalyst for bringing together agreements between the governments.

QUESTION: You talked about the strong ties between India and the U.S., but given the news from the meetings yesterday, it seems there has been a series of differences on various issues - agriculture, markets, and so forth. How can you feel that India and the U.S. can work together…[inaudible]

SECRETARY SNOW: Friends don't always agree on everything. I love my wife but she doesn't agree with me on everything. I don't agree with her either, but the differences are small compared to the points of agreement. The differences are small, relative to the things that bring us together, hold us together. On trade, our Ambassador - Minister, really - who oversees trade activities will be in Delhi, I think, tomorrow or the next day, later this week, to meet with his counterpart, and I think there's real room for us moving together. After all, India is now a country that is one - in terms of the trade sector, the external sector as the function of GDP, one of the most advanced in the world. India has embraced the world economy and is very much part of it. India stands to gain, it seems to us, a lot from further market openings. Agriculture's the key to this. India's one of the largest agricultural sectors in the world. When you talk to businesspeople, they're looking to make investments in agriculture here because they see a brilliant future for agriculture, as more modern technologies, seed technologies and things, are brought to bear on the Indian agricultural sector. So it seems that India would gain significantly from the Doha Round, and the United States is clearly trying to encourage progress on the Doha Round. President Bush spoke to the UN here a month or so ago, and challenged all the people who were negotiating the Doha Round to move forward. He said the United States is prepared to do our part to reduce quotas, tariffs and subsidies, as others do that. I'm still hopeful. I'm still hopeful on Doha.

QUESTION: [inaudible] regional talks within the WTO help…?

SECRETARY SNOW: Well, I think people need to express what's on their minds so that it can get put on the table to get resolved. And it is important that we all come together across the world. And countries all have internal problems - we understand that; we have internal problems - that have to be dealt with as you move through this sort of process. But the end result is worth the effort, because the end result of this is huge opportunities to make the world economy bigger, in which we all gain. The thing about trade is that the world economy as a whole gets stronger. There's more output. There's potential for higher per-capita income, and more good jobs. And India, with its abundance of talent, labor, entrepreneurship, really stands to gain from further market openings. And I think we will be successful.

QUESTION: Would you like to say anything about the Indian position on foreign direct investment in the retail sector, considering the fact that Walmart has reached China and the fact that we don't allow FDI [inaudible]?

SECRETARY SNOW: Well, I've seen comments by Indian officials that they're looking for further FDI, more FDI is welcome, and FDI is encouraged, and comments by very senior officials in your government to the effect that retailing is one area that needs to be looked at, and that it will be looked at, so I would just encourage that. I think that's going to be in India's interest over time.

QUESTION: You stressed infrastructure development in your visit. Could any concrete, major announcement be expected before the end of your visit?

SECRETARY SNOW: Well, I don't anticipate any major announcement. We're here really to exchange views and to learn more about India and learn about the potential - the things we can be doing and you can be doing, together. We're doing a lot of things together. I've recently learned that people of Indian origin represent over 2 million people in the United States. Eighty thousand Indians are going to school in United States. Trade is growing, FDI is growing, commercial relationships are strengthening, agricultural cooperative projects are moving forward. Your business groups, like the Confederation of Indian Industries we met with this morning, have counterpart relationships with U.S. groups that represent U.S. interests. We have the India-U.S. Business Council. There's a lot going on that is tangible evidence of the growing ties between our two countries, and now we have this civil nuclear agreement that is moving forward, and that's an important point of progress in our relationship. So, I don't have intentions - I don't have any
plans - to announce anything. I do want to call attention to the variety and range of cooperative ventures between our two countries: in education, and science, and technology, and health care, in services, in trade and commerce in general.

QUESTION: Would you advocate a cap on foreign investment in the insurance sector, and will you talk to the Finance Minister regarding this?

SECRETARY SNOW: It seems to me that's continuing progress, widening those foreign direct investment rules. In talking with people who are authorities on it, I learned that the whole insurance sector seems to be becoming more advanced, growing faster, [with] new products, a lot of expansion that's occurred; [inaudible] but will probably continue on that path. So we want to encourage those sorts of market openings. India's gained so much over the last 15 years through these reforms, by these market openings, by this engagement with the wider world, that it seems to me the evidence is pretty clear, that's the right path to be on. So we want to encourage that.

QUESTION: You've talked about a major roadblock as dispute resolution, how it takes time. What do you expect that could be done to further reforms in that area?

SECRETARY SNOW: Well, I don't know. I just - I don't have the specifics, I don't have the-

QUESTION: - just in general.

SECRETARY SNOW: But, generally, the idea here would be to look at the feasibility of putting in place a commercial arbitration process, or an expedited dispute resolution process of some kind. So that this uncertainty about legal framework, about legal outcomes - not so much the outcome, but the timeframe of the outcome - can be reduced. Businesspeople hate uncertainty. They detest uncertainty. They run from uncertainty; they don't want to encounter it. They want to know what they are getting themselves in for when they make a capital investment. One way you know what you are getting yourselves in for is to have a certainty associated with dispute resolution, that, win or lose, we're going to know, that [it's] resolved our way or resolved the other way; there's a timeframe. So the money doesn't get tied up forever in blind alleys. That's what I've got in mind here, I don't know what the answer is, but when I raised this with a couple of business leaders here, they said, "yeah, we ought to be thinking about that. It sounds like something that would improve our institutional framework to attract capital."

QUESTION: Some of the bankers and experts this morning left with an impression that the US position is that it wants majority stakes in Indian banks, full control of the banks. My point is, why is that attitude - why has the US accepted minority status in the Chinese banks, but why is that unacceptable in India?

SECRETARY SNOW: Well, it's not that it's not acceptable, it's what best for India. The real question is: how do you best - how do you put this economy on the best path? And precluding people bringing capital, expertise, talent, energy into an economy is a questionable way, in our view, to best advance your interest.

QUESTION: The U.S. is pressing for reforms across Asia. How do you assess them in China?

SECRETARY SNOW: Oh, I don't know that I'd be in a good position to do that. You've got both of these economies growing at a good clip. Each has embraced market forces, play out market forces on a larger scale than has been the case in the past, and each seems to be moving forward with the continuing commitment to enlarge the role of market forces. Our main issue with China, of course, is intellectual property rights, counterfeiting, making sure that market rules, WTO rules are enforced and complied with. And the currency: moving to a more flexible currency regime. And those are the issues we raised when we were there. The issues here are somewhat different, but I think in both cases the notable thing is the progress that's being made both in India and in China, and complementing all that is the fact that these two economies are moving ahead very fast in terms of the role they're playing in the whole global economy. And I'm pleased to see India and China taking more responsibility for the global economy, each -
in the case of India, and the case of China, there is a growing sense of being a leader in the global economy, and, therefore, having responsibilities for how the global economy operates. And we've welcomed India and China to the G7 meetings, back when I was Chairman of the G7 two years ago. We first invited India and China, along with Brazil and South Africa, and Russia, to join, with the idea in mind we need a fuller complement of those who are driving the global economy participating in these discussions. We've championed the IMF for larger participation for Asian countries like India and China.

QUESTION: In the Volker report, [inaudible] so many countries. Politics aside, will the U.S. be investigating companies that take kickbacks?

SECRETARY SNOW: I think we've already announced that we are working on it. The Justice Department will be looking at that and doing an inquiry to see whether any further action is justified.

QUESTION: Do you feel India should do the same?

SECRETARY SNOW: Well, I'm going to leave India to do what India should do. India is a better judge of what it should do than I am, but it's natural - in the United States at least - that when an issue like this arises, the Justice Department does an inquiry.

QUESTION: You mentioned the G7. [inaudible] What are your views on that? How soon do you see India and China joining as full members?

SECRETARY SNOW: Well, I don't know that there is a precise timetable, like March of 2011, that we have in mind: it's a trajectory, not a timetable. I think it was a statement of a direction, of a broad theme, that India and China…on a purchasing power parity basis, I think China is now number two in the world and India is either three or four. Which tells you that these are big and important economies, these are big and important players in the global world, and you can't have a really informed and effective discussion about the global economy unless the people who are driving the global economy are at the table. I think that was the idea behind those comments. Now, of course, G7 has certain other requirements other than being a big economy. But that's the idea.

QUESTION: Do you think the world can afford higher interest rates like the ones hyped by Asian countries? What is your assessment of the Asian countries' interest rates?

SECRETARY SNOW: Well, I think the world has to lean against inflation. I guess the role of the Central Bank's Governor is to create conditions for non-inflationary growth. I don't comment on monetary policy; that's an independent part of our government, so I don't comment on or offer recommendations to them. I will say that this it is important that they fulfill their responsibilities, and their responsibilities are to lean against inflation and deflation to create the conditions for stable, non-inflationary growth. And I think they have done a pretty good job of it. If you look around the global economy, one of the dramatic differences with the past is inflation, the fact that inflation is in much better check: not just in the United States, not just Europe, not just Latin America, not just Asia, but everywhere, we have a fundamentally lower, more benign inflation environment. That's a positive sign, and that reflects, I think, well on central bank governors because ultimately inflation is a monetary phenomenon and good monetary policy is contributing to the stability of the global economy. Now as Alan Greenspan said recently, central bank governors have to always be on the alert and the very process of creating a non-inflationary environment creates expectations that inflation won't come back, and central bank governors need to always be anticipating inflation and leaning against it before it happens. They can't wait till it happens in order to check it; they've got to check it before the genie is out of the bottle. So I think I would give high marks to the Central Bank governors for the way that, in the aggregate, monetary policy is being conducted in India.

QUESTION: Can I ask you one question on oil prices?

SECRETARY SNOW: I don't have a good sense of where oil prices will be; the market will tell us. I don't know who is a very good predictor of energy prices. Over time, I think they will moderate.

Thank you.