I am honored to be here today to speak to the 8th annual Indian Investment Forum.
I first would like to extend a warm welcome to the Indian Ministers who have traveled so far: Finance Minister Mukherjee, Commerce Minister Sharma, Power Minister Shinde, New and Renewable Energy Minister Abdullah join a galaxy of other senior officials here for the UN General Assembly including Prime Minister Singh, External Affairs Minister Krishna, National Security Advisor Menon, Foreign Secretary Mathai and many others.
Their collective presence underscores the tremendous importance India has in the world of multilateral diplomacy, trade and commerce, and other global issues. That is why President Obama has said that U.S. relations will be one of our defining partnerships of the 21st century.
I would also like to take a moment to thank our co-hosts Institutional Investor and India Infoline for their hard work and effort in putting together this event and for allowing me the opportunity to speak to such a distinguished group.
Ladies and gentlemen, as we look at the week’s gloomy economic headlines, history tells us that periods of economic transition often open up unanticipated opportunities. I was struck by a Financial Times article published last week, which noted that “a recession is often seen as the furnace for recovery…a string of great U.S. companies have come out of such adversity. Proctor & Gamble, IBM, General Electric, General Motors, United Technologies, Hewlett-Packard and Fed-Ex are all the children of hard times.”
That got me thinking: Which up-and-coming companies will be the “children” of this economic slowdown?
What will they produce, and how will they help our citizens live better? Might they be based in Mumbai or Minneapolis? Hyderabad or Houston? Better yet, Delhi AND Denver?
One thing we know for sure: our companies, our peoples, and our ideas are now connected in stronger and deeper ways than ever in the past to the benefit of both of our economies and our people. That’s why the United States and India will host a Higher Education Summit in Washington on October 13 chaired by Secretary Clinton and Minister for Human Resources Development Kapil Sibal.
The summit will explore how government, universities and business can collaborate to create innovative and sustained higher education partnerships between our two great countries. These partnerships in turn can help both our countries ensure that our knowledge-based economies can keep our competitive edge in the 21st century and provide opportunities for our people.
The U.S.-India investment relationship will be another driving factor in creating such opportunities. It is a relationship of immense importance to both India and the United States, not just because of the impact of investment on economic growth, but because of its importance to the overall bilateral relationship between our countries.
Taking Stock: Bilateral Economic Ties
I have been privileged to witness advances in the U.S.-India partnership since 2003 when I served as Deputy Chief of Mission at the U.S. Embassy in New Delhi. The bedrock of both our economic and political relationship is the dynamic and ever expanding private sector represented by the hundreds of companies and investors here in this room.
You have driven the acceleration of trade and investment between the U.S. and India.
And we make it a priority in government to ensure that all of our activities are informed and continue to contribute to continued economic dynamism.
Just yesterday Deputy Secretary of State Burns and Deputy National Security Advisor Froman hosted in Washington the latest iteration of the U.S.-India CEO forum, which reinforced the impact that the U.S. and Indian private sectors have in informing and shaping interactions between our two governments.
Your companies – and those just like yours – create jobs, develop technology, encourage trade, and promote economic openness in both the United States and in India.
Our bilateral investment policy with India plays an important role in facilitating the creation of jobs both here and in India. The United States has two goals with respect to investment policy:
· First and foremost, to increase Indian investment in the U.S. – which will help Indian companies continue their expanding levels of growth and development while at the same time creating jobs in America;
· Second, to ensure U.S. companies can compete on a level playing field in India and the rest of the world and operate in the same open and fair environment that Indian companies enjoy in the U.S.
A Safe Harbor in Rough Seas: Investment in the United States
As many of your companies know firsthand, the United States is the world’s number one destination for foreign direct investment and for institutional investment. Even in our challenging economic times, this maxim has never been truer.
Businesses worldwide – and, in particular, businesses from India – invest in the United States because of our pro-growth business climate, productive workforce, open banking and financial sectors, and innovative culture.
What’s new in recent years is inbound investment to the United States from India. India has become the 7th fastest growing source of investment in the United States, creating well-paid jobs for tens of thousands of Americans.
The stock of Indian FDI in the United States grew at a compound rate of 35 percent between 2004 and 2009, while total trade in goods with India between January and July 2011 was up 20 percent over the same period last year.
President Obama has recognized the importance of foreign direct investment and the importance of making it easier for foreign companies to invest. To improve the ease of investing in the U.S., President Obama recently announced the creation of SelectUSA, a government-wide initiative to encourage, facilitate, and accelerate business investment in the United States by both domestic and foreign firms.
This initiative will enhance coordination across all federal agencies, and work in partnership with state, regional and local economic development organizations to promote and facilitate attraction and retention of businesses to the United States.
We in the State Department are undertaking another initiative to support and expand state-level trade and investment between the U.S. and India.
Last month, Special Envoy for Intergovernmental Affairs Reta Jo Lewis visited seven cities in India to further foster state to state and city to city links between the U.S. and India that will help both countries learn from the best practices of the other country.
This facet of our cooperation holds enormous potential as we seek to leverage the innovative work and broadened connections across financial, technology, and human capital at the state, city, and local levels.
The Crossroads of Asia: Investing in 21st Century India
And just as the United States understands the benefits of foreign direct investment so too does the Government of India. The businesses that choose to invest in India create jobs and help raise standards of living.
Overall, India’s market offers tremendous opportunity to U.S. exporters of goods, services, and investment.
One reason lies in the great demographic change taking place in India, such as the enormous shift towards urbanization. Over the next 20 years, urban India will become even more central to global commerce, the place where Africans, Asians, and the West will come together. Cities in India will create over 70 percent of new jobs, and the urban population will increase – astoundingly – to 590 million by 2030.
The United States seeks to work with India to achieve India’s goal of increasing infrastructure investment and, in particular, of meeting the 12th five year plan’s goal of achieving $1 trillion in infrastructure investment by 2017.
U.S. investment in India’s infrastructure is already modernizing supply chains, building new airports and power plants, and is helping to forge partnerships that will create the Indian economy of the future. But there is more that U.S. investors can be doing.
For example, as part of the U.S.-India CEO dialogue this week, the U.S. EXIM, OPIC, and USTDA agreed to explore opportunities to work with the private sector and with each other to facilitate the development and expansion of cold chain systems leveraging American technology in India.
CEO Forum members also called for the establishment of a formal bilateral business committee to develop joint goals, identify opportunities for collaboration and suggest potential pilot projects that will demonstrate best practices in cold chain development – the result of which has the potential to help create the infrastructure necessary to bring food to market safely, reduce food price inflation, and improve the efficiency and profit for Indian farmers.
We also know that good economic governance and a welcoming investment climate will help India attract even more of the foreign investment it needs to develop for the 21st century.
U.S. businesses, like all businesses, are attracted to investment destinations based on the investment climate, transparency, and the ease of doing business. We support and prioritize in our relationship with India the many ongoing efforts to make it easier for all investors, including those from the United States, to invest in India.
At July’s Strategic Dialogue in New Delhi, the U.S. and India agreed to resume technical negotiations on a bilateral investment treaty (BIT) with negotiations beginning in mid-October. A BIT would deepen our economic relationship and improve investor confidence for both U.S. and Indian investors.
Over the past twenty years the Government of India has made enormous strides to open its economy to foreign investors, but as the Indian government itself acknowledges, there remain key challenges that impede foreign investment. India ranks 134 out of 183 countries in the World Bank’s index of “Ease of Doing Business.” India’s infrastructure constraints are of course well known, as is the need to ensure that India’s growth benefits all segments of society.
Restrictions in the amount of investment in the retail, insurance, defense and other key areas continue to limit the expansion and investment of American firms, and limit the possibility for joint ventures between U.S. and Indian firms in India.
Conclusion: The Way Forward
Let me conclude by reiterating the tremendous promise of our growing trade and investment ties. The U.S. and India will be two of the world’s three largest economies in the world by 2030.
Bilateral investment between the United States and India will be crucial to shaping a century where the previous rules of the game don’t apply.
Rather than stifle opportunity through needless protectionism, or taking a halting approach to improving the investment climate, the United States and India must seize upon the natural convergence of our peoples and our industries that has occurred of late.
We will do this by forging an investment climate that acknowledges the challenges and seizes opportunities unique to the 21st century. I know the next generation of path-breaking companies will help to solve our most pressing problems, revolutionize the way we work and live, and provide prosperity to our the entire world. But they will need our help now.
Our responsibility today is to make the critical investments necessary for this vision to become a reality, to invest in our people and businesses with equal vigor and resolve. Our people are ready. Tomorrow’s success will be founded on the resolve of every single individual in this room, and the decisions we make today and going forward.
Thank you so much for your time, attention and partnership.
