A multi-faceted
relationship*:
Indian
PM
“I am absolutely delighted
to be here before such an impressive array of leaders of
Japanese business and industry. I thank Chairman Mitarai
and the Nippon Keidanren for giving me the opportunity of
speaking to all of you. I also extend my warmest greetings
to the captains of Indian industry who have specially
travelled here for this very important occasion.
My personal association with
Japan goes back many years to my early days in the Government
beginning with 1970s, well before I became the Prime Minister
of India.
Japan was and remains a generous
aid donor and we are extremely grateful for the support the
Japanese Government has always given for India’s development.
Our relations have changed
considerably over time and we now have a multi-faceted
relationship. Japan is not just a source of development aid
but an important investor and partner in building Asian
co-operation. For me, each interaction with Japan has been a
most pleasurable, educative and rewarding experience. It has
revealed to me how much our two countries can do together, and
how little we have done thus far.
It was in recognition of this
that Prime Minister Shinzo Abe and I established our Global
and Strategic Partnership in December 2006. I have come to
Japan to consolidate this partnership.
We meet at a time of great
turbulence in the world economy.The international financial
crisis, which still continues, has revealed the extra-ordinary
vulnerability of the global financial system even in the
industrialized world. The crisis has choked credit flows and
predictably spilled over to the stock market. We have to
prevent the liquidity crisis from becoming a crisis of
confidence in the international monetary and financial system.
The Governments and central
banks of the major economies have taken strong and even
innovative steps to deal with the crisis.The global nature of
the crisis calls for a coordinated global response.
Developing countries like India
are also affected by the crisis and have to be part of the
solution. We cannot afford to risk the gains we have made in
the last few years. Nor do we wish to remain vulnerable to
infirmities in international surveillance, supervision and
regulatory mechanisms in the future.
We have taken several measures
in India in the last few weeks to ensure adequate liquidity
and confidence in our financial system. The fundamentals of
Indian economy have been and continue to be strong. Our
banking system is well capitalized. But, we have experienced a
shrinking of liquidity and we are responding by injecting
additional liquidity to ensure that the rhythm of economic
activity is not disrupted.The Reserve Bank of India stands
ready to respond quickly to address the emerging needs of our
economy.
The short-term outlook is
somewhat cloudy but I am confident that the Indian economy has
the resilience to sustain its growth momentum in the medium
run. We hope to build on India’s many inherent strengths as an
emerging market economy that is now ready for rapid and
sustained growth. Over the past four years, we have averaged
9% GDP growth per year. It looks like slowing down in the
current year because of conditions in the global economy. But,
once normalcy returns, we can and we are determined to regain
the 9% growth trajectory. We have a tradition of a high rate
of domestic savings averaging 35% of our GDP. This is like
most Asian countries, and we also have a strong and a dynamic
private sector.
As we work to put India on a
higher growth path with greater inclusiveness, India and Japan
can cooperate in many ways. Japan is the economic and
technological powerhouse of the world. India is a major
developing economy on the threshold of rapid economic growth.
Both of us are located in Asia, to which the 21st century must
undoubtedly belong. Both of us have the wherewithal to become
the magnet of growth in Asia and globally. India and Japan can
cooperate in the coming period of global slowdown to devise
effective counter-cyclical strategies to create a new Zone of
Growth and stability in the world.
The record of our economic and
trade interaction in the last few years bodes extremely well
for the future. Although the share of India in Japanese
Foreign Direct Investment overseas is insignificant right now,
there has been a surge in Japanese investment into India last
year. The number of Japanese business establishments now
operating in India has increased to over 500.
Discussions have moved forward
on implementing the flagship Dedicated Freight Corridor
railway project and the Delhi-Mumbai Industrial Corridor
Project. Technical issues relating to the Dedicated Freight
Corridor have been resolved to our mutual satisfaction and we
are in the process of finalizing an ODA loan for this very
important infrastructure project.
The Delhi-Mumbai Industrial
Corridor has the great potential to emerge as a global
manufacturing and trading hub supported by world-class
infrastructure and an enabling policy framework.
Bilateral trade between India
and Japan has been growing, and has reached 10 billion US
Dollars for the first time in fiscal 2006-07. At the current
rate of growth, we can hope to achieve our target of 20
billion US Dollars by 2010.
We are deeply grateful that
India has been the largest recipient of the Japanese ODA for
the last 5 years. Its most visible symbol is the Delhi Metro.
At the government level, the
India-Japan Policy Dialogue set up in 2005 at the official
level has been upgraded to the Ministerial level. An
India-Japan Energy Dialogue was established in December 2006,
and cooperation initiatives have begun in the urban
development, tourism and civil aviation sectors.
We have established a
high-powered Business Leaders Forum to lead the widening
economic engagement between us, and project the views and
concerns of the private sectors in both our countries.
Our infrastructure financing
requirements over the next five years are estimated at 500
billion US Dollars. Financing this level of investment
presents a special challenge in view of the uncertainties now
prevailing in capital markets of the world. We must look for
new sources of finance. And Japan here becomes very important
for us. We also have an ambitious plan for upgradation of our
soft infrastructure in the areas of health, education and
social welfare. We have put in place schemes to revitalize
agricultural growth and focus on rural development.
We welcome Japanese investment
in our efforts to build a new dynamic India. We have begun to
attract investment from Japan but it is much less than its
full potential. To Japanese investors I would say – India
today provides a large, growing and young market. The
creativity of its people and their rising aspirations will
drive the real economy in the foreseeable future to scale new
heights.
Above all, India provides
stability and transparency in its decision making processs.
Our institutions have stood the test of time. With every
challenge, they have emerged stronger and stronger. Our
process of decision making may appear cumbersome but decisions
once taken rest on the solid foundation of consensus in our
well functioning democracy.
Based on the above, I would
identify the following areas particularly sfor our future
engagement.
Ø Cooperation in high-technology
areas and the building of a knowledge economy through transfer
of technology. Japan can become our preferred partner in areas
of established Japanese competence such as energy efficient
technologies, power generation and distribution, including
development of ultra-mega projects based on super critical
technology, and in the development of new and renewable
sources of energy, including clean coal, solar and nuclear
energy.
Ø The early finalisation of a
Comprehensive Economic Partnership Agreement is high on the
list of our priorities. This will broaden our trade basket and
enhance reciprocal investments. It will provide economies of
scale and allow India to serve as a global manufacturing hub
for the Japanese industry. The Agreement should promote
further export of our goods and services into Japan through
the removal of tariff and non-tariff barriers. I would like to
once again state that the negotiation of a Comprehensive
Economic Partnership Agreement with Japan remains very high
priority for the Government of India.
Ø Upgrading of India’s
infrastructure through more effective use of public-private
partnerships and joint ventures offers yet another area of
exciting opportunities in the future.
Ø For greater cooperation in the
fields of skill development, education and advanced research
and development through more intensive exchanges between our
universities and institutions, we should establish greater
connectivities, both physical and intellectual, to underpin
deeper engagement between our two countries.
Ø Working towards an integrated
Asian Economic Community should be a common endeavour of both
India and Japan. Our “Look East” policy and Japan’s vision for
the integration of the Asia-Pacific provide a meeting of minds
which can be translated into concrete initiatives. The newly
established Economic Research Institute for ASEAN and East
Asia is ideally suited to contribute to the finalization of a
Comprehensive Economic Partnership in East Asia among the EAS
participants.
Ø The relationship between India
and Japan transcends the economic domain. Our two countries
understand the language of democracy and rule of law.We share
the common values of freedom, an open society and a free
market economy. We share close civilisational links, and
believe in the Asian approach to problem-solving and wealth
creation. We wish to learn from the Japanese style of
management and the premium it places on humane qualities and
traditions.
Finally, I wish to say that new
investors often worry about the difficulties that they may
face in a new environment. Let me however point out that the
increase in India’s bilateral trade with China in the past one
year alone is more than the whole of India’s total trade with
Japan. Korean products dominate our white goods sector and
have high brand recognition in India. I suggest to this august
audience that improving upon that should be a common challenge
for industries of both India and Japan.
A vibrant democracy often
presents new challenges. However, I urge you to have faith in
our economic system and our resolve to transform our economy
and polity.We are committed to creating a congenial climate
for private initiative, risk-taking and enterprise both
domestic and foreign enterprise.
The British economist Lord
Keynes once said, in our world of uncertainties, investment is
both an act of faith and also an act of great adventure. I
urge all of you to have faith in India. The India of 2020 or
2040 will be far more educated, far more skilled, and will
have far greater purchasing power. It will be an engine of
growth for the global economies.
I invite each of you to be our
partner in this exciting journey. We wish to see Japan occupy
a central role in our quest for sustainable development and
poverty eradication.
I thank you for your kind
attention.”
*
PM's address at business
luncheon hosted by Nippon Keidanren, Tokyo on October
22, 2008
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