What Americans Need to Know about India

Thank you, Jim, very much. It's a pleasure and an honor to speak to you all this morning and it's even more pleasant to be introduced by Jim Jones. The honor that Jim accorded to me, by coming in, speaking on my behalf, is only exceeded by his serious effort to provide you with a great deal more than faint praise and some serious hyperbola, and I thank him for both. It's a pleasure to be here, and it's good to have an opportunity for me to talk a little bit about India. I must confess, at the beginning, that it was my shortest stay as an Ambassador, only seven months, in part, because President Clinton wanted me to go on to Russia, where I had never been, but was anxious to go. But I had the opportunity many times since, to go back to India in various kinds of work, both in and out of government. I continued to do so and was there most recently just a month ago. . It's good to be here and it's good to be challenged by the opportunity to tell you what it is that you all need to know about India. And to do that, I'm going to begin a little bit differently. Let me begin by telling you just a few things that you ought to forget about India in order to kind of keep you awake at this early hour in the morning and see if we can use that as a way to move on to some of the more interesting and constructive things to say about India. The first thing that I hope you to forget about India that India is a leader or has been a leader of the Non Aligned Movement, and therefore has congenitally unfriendly to US policy and remains so. Secondly, I would like to have you forget that India is more of a Socialist government intervention non-market driven economy than a vibrant market economy with some holdover problems. When I was Ambassador in India, I used to say that for 40 years the Congress Party had been struggling in their own view to take Indians out of the market place, but what they had forgotten was: with 4000 years of Indian market economy history, it didn't figure out how to take the market place out of Indians. Another thing to forget that corruption is becoming insuperable barrier for an American company trying to do business in India and maintain faith with American law and the Foreign Corrupt Practices Act. My company does do business. We are proud of doing business in India, and we have not succumbed to those temptations to violate our national law or indeed I think increasing Indian efforts to focus, you know, on their serious problems of corruption. Another thing to forget that India has been claimed to be a serious proliferators of nuclear weapons. Another one is that US and Indian interests are necessarily at odds with respect to a Iran and oil, that India is an obstacle to peace in Kashmir. That India is only interested in South Asia and its role there, and doesn't have to be dealt with as a major regional power, or indeed one with global aspirations, that the Indian military establishments has been too burned by previous developments in US Indian relations to support a strategic partnership in ways which they can play a role for the future. And, that the Indian military establishments, has over the years, become too wedded to principally Russian and secondarily French military equipment, to want to buy, acquire, and use American military equipment, that India is less important to US interest than is China, and then finally, outsourcing in India is inevitably losing proposition for American workers and for American enterprise. All of these, I hasten to add, in my opinion are wrong, so forget them. If you have got questions, we get to the question period, please raise them. So, now, let me, having awakened you from your post breakfast lethargy, turn a little bit of our attention to what it is, that I think, you should know about India. It's easy to begin with the obvious things: India has been and remains the world's largest democracy, certainly in population terms. It's large geographic area, you are deceived by the Mercader maps where India close to equator seems to have less territory than many other states further away, but it is, as you know, approaching 1.1 plus billion people. In 2035, India will, in the view of many, become the third largest economy in the world and the world's most populous state. Population size has its drawbacks and its disadvantages as well as its advantages. India still has roughly 800 million rural poor, but it has, to counter balance that, a growing middle class, many say 2 to 250 million by Indian standards, doesn't mean western standard in terms of their cash income level, but in India they are a class of growing affluence, and a class of growing economic participation. In my business, one only has to look at the fact that India is perhaps the worlds largest provider for airplane market, and in the Paris air show this last year, India was the new baby Dinosaur in the buying group. India purchased more than 2 to 300 airplanes over this last year. Happily a few of them are Boeings. India adds to its population each year one Australia, about 15 million people. India is truly a young country: 50 percent of India's population is under the age of 25. As you all know, India occupies a geo-strategically important position on the realm of south Asia and across the center of the Indian Ocean and India's primary interest for years have been in those geographic areas but they are now expanding. In India, looking east and south, and north as well as all across the developing world and United States and we will explore some of these in a minute. But, it is interesting that India has become a more significant player in the Asian neighborhood than ever before. India, like a few others, is a continental country. We are. Russia, perhaps Canada, and Australia, China. Countries whose breadth and heights on the map help to determine some of it's characteristics, and I have a personal definition of a continental country: it tends to be more interested in the news from Peoria than Peking. It tends to be mostly unilingual, it tends not to be interested in a great deal that goes on outside. Holland is the opposite of a unilingual country, everybody speaks four languages, travels extensively, and almost from birth has visited foreign countries. India is still inward looking. India conducts, on the average of once every five years, the world's absolutely largest exercise in democracy: 700 million people go to the polls. It's significant percentage of Indian voters, and it is an organizational task of formidable proportions, and one that often has to be accomplished in steps, in stages, but it is one that is universally seen as a real exercise in democracy with some but few, particularly in proportion to the size complex, about freedom and fairness in the election. India, because of it's long historical evolution, is a country of languages, ethnicities and religions. The Indian constitution recognizes now almost 20 major languages in the country. But the lingua franca is increasingly a combination of English in the country, as a whole, and Hindi, more in the North than it is in the South. India is, in every sense of the word, a secular country, with more religions than you and I will ever know. India, according to the linguists has at least 1600 languages if you include all the people confined and count. And, it has multiple religions. It is the world's largest Hindu country, but it is the second largest Muslim country in the world. Christianity is often reckoned the third largest religion in India, but barely gathers two percent of the Indian population And if you know something about Eastern religions, you will know Buddhism began in India, that Jainism is an important religion in the country, and that Sikhism began in India and remains noticeably one of the great Indian religions. Christianity in India is one of the oldest in the world, traces its history to St. Thomas, the Apostle, who according to history, arrived in India in 52 A.D, and the church, the Mar Thoma Church has had a continued existence from that time period. And, Judaism, India has had Jews perhaps since the time of Solomon and certainly since the time of the fall of the temple and perhaps, the Babylonian captivity. The Indian Prime Minister right now, is a Sikh, the President of India is a Muslim, and the largest party, the Congress Party is currently headed by a woman born in Italy and married to a former Prime Minister. Increasingly, the Indians see themselves as Indians and not as something different. India is a federation of states with a strong center. India is not without its ethnic difficulties and problems, of course. India, as you know, is a nuclear power, and this has led to controversy with our country, we will discuss that, at some length, in a minute. India has a large strong military, an Indian military assessment any assessment of Indian military we would have to say that the primary attribute of the Indian military, as is not true in so many countries around the world, particularly developing countries, is that it is subordinate, and has been to civilian control. In the Cold War divisions, in the post independence period, as I earlier mentioned, India was close to the Soviet Union, in the acquisition of military equipment, in training, in trade and with some affinities, but I would say over draw it, between Communism and some of the Indian Fabian Socialist views, which characterized strongly the period of Congress Party rule from independence in 47 through the 80's. India has the world's third largest Army, the fourth largest Air force, and the seventh largest Navy. India's aspirations are, very clearly, to be the most important player in South Asia, to play a very significant role in the picture of Asia's politics and economics, and to be increasingly larger player on the global scene. And India, along with Germany and Japan, and perhaps Brazil, has had serious aspirations, implemented diplomatically over the last couple of years, for a Security Council seat at the United Nations--a permanent seat with a veto. That process is at the moment in limbo. It will be interesting, and I think to bring you up to date on what you are to know about India, to look at some of the significant changes that have taken place in India since the end of the cold war. Let me begin with economics, because increasingly as I look around the world, economics plays a critical role. India, has obviously, many issues to address, the most significant of those is, a fairly thorough going economic reform to empower the role of Indians in the market place. In some of the current issues on the agenda that have to be addressed is a growing fiscal deficit and antiquated labor laws but there are others. But India since, roughly 1990, has been engaged in a move for a mixed economy with a very large government role in planning and in control of the economy, and indeed in government participation, to one in which the government is playing a less dominant role and the private sector, increasingly, a more important role. There always was a private sector of importance in India, but that's now increasing its strength, and the market economy has become more privately oriented, especially in some important fields where India has helped to lead world development, information technology being pre-eminently the most important. As I said in my introduction, India has always had a traditional sense of the market place in a traditional focus, in village life and beyond around the market. In the post independence period, the Congress Party was heavily influenced, I think, by much of their educational experience in the end of the colonial days partly through the influence of Fabians and the London School of Economics. They helped to convince Indians that the future of the Indian economy, under the new post independence government, would be one in which the government had to play a necessity, a very large role in development and in control, and in moving processes ahead. That slackened only slowly as people began to understand and compare the successes and failures of Socialism as a governing principle in developing countries' economies. And, about 1990, under the Congress Party, a young and energetic Sikh Finance Minister by the name of Manmohan Singh and the group of excellently trained economists around him, began that process The process was heavily devoted to finding ways to free up government control. India had become, over the years, subject to a process which aficionados of Indian economy tend to call "The License Raj". When I was Ambassador in India, we made a count of the number of signatures that a foreigner had to get on paper, in order to start a business in India, and it was just a little south of a hundred signatures. This required, obviously, an enormous amount of patience, or a significant amount of "lubrication". And so, "lubrication" grew as a way of life and underpaid civil servants supplemented their income and the number of signatures on papers tend to grow, and as a result the economy began to freeze. Calls for domestic and foreign investment, and this was recognized, and so this was one of many points of attack for movement and it continues. India is far from a perfect state in this regard, but it has made progress. Recently, the evaluations of the Indian economy have shown three kinds of progress that I think are worth mentioning very briefly: one is the disparities in regional growth. Little bit like our country, South and West Indian states are growing more rapidly than northern and eastern Indian states. Secondly, India, with a huge burden of poverty that it carries, has never made progress in both in the urban and rural areas about a 10 percent reduction over the last decade, in people below the poverty line has taken place as a result of the developmental process, both governmental and outside. And then finally the bulk of Indian investments still remains domestically generated, internal investment, but there is growing foreign investment in India, and that will probably see new growth in the future. I mentioned earlier the reform leadership was in the hands of the then Finance Minister, now Prime Minister, it was a strong team, he was aided inthat day someone who ran the Congress department in India has now, his replacement as Finance Minister, a man by the name of Chidambaram, and he was helped by someone in those days who was the top civil servant in the Finance Ministry, a man by the name of Montek Singh Ahluwalia. Some of you may know him because, for a number of years, he was a special advisor on the IMF, on how to deal with developing country problems, something the IMF, many felt could use some education on. He is now deputy head of the Planning staff, and I would say part of Prime Minister Singh's close economic kitchen cabinet. A report card on Indian industry, at least IT, would be worthwhile When we think of IT most of us think of Bangalore. Bangalore is a key center, and it was perhaps the beginning point, a marvelous city in the Southern part of India in which the IT revolution in the country caught hold. But now, if you are to add up the IT centers in India, certainly a place called Noida, outside of New Delhi, is very much worth looking at, and growing. Mumbai and Chennai, formerly Bombay and Madras, but Hyderabad has grown rapidly and it is an important place, if you are interested in investigating Indian IT to visit, is now Puna in the hills, about a 100 kilometers East of Mumbai. How did IT get started in India and how did it escape becoming another victim of the License Raj? It was interesting. There are two theories: the simple theory is that Rajiv Gandhi, then Prime Minister, let it happen, kept the bureaucracy out of it, and there is some evidence of that, including people who worked closely with Rajiv, but he did it in a very stealthy way. And there are other who think that once this got galloping, it stayed ahead of the bureaucracy, that there wasn't the capability within the slow moving bureaucracy or legislative process that made the strictures necessary to stifle this baby in its cradle. In about 1991, it represented $200 million infant industry in India. In a decade it has grown to be at least 20 billion and going north rapidly, and is certainly one of the great evidences of the fact that a significant combination of Indian education, which is high quality at the top end, and Indian skills and Indian interests in business, can come together in a new project in a very effective way. Many of us are looking in the American entrepreneurial world, at the advantages that India provides us in the IT world. Excellent high quality software, good performance on back office, call centers, a world class world center in both of these areas, but increasingly it's own R&D and technological development, a source which is steady and we can count on, and a manpower flow that has kept the average annual wage for an Indian PhD in this field at probably within 10 to 20 percent of what it was 12 years ago. India graduates 100,000 engineers a year. What has made India so exceptional is one of the historically outstanding efforts made by developing countries to do in India what it has failed to do, I think well in many other places around the world, to develop an absolutely superior top end educational system. The Indian Institutes of Technology and The Indian Institute of Science. In the 50s, it sort of went this way: a number of donors got together and said, "Why don't we each sponsor the development of a top class institute in science and technology in India and marry it up with the best that we have, the Caltechs and the MITs, and see in fact if these people cannot become one of the new locomotives for Indian development. And I'm happy to tell you that has worked like a charm, the standards have been maintained. If you look at business magazines in the United States, from time to time they will tell you that the bulk of some of the top class talent in the market in the world are the graduates of this system, and we can look at Silicon Valley and see many of those graduates who began, new American IT startups, and as they have become phenomenally successful, they have migrated a lot of this fact to India, so it is the synergy between Silicon Valley and Bangalores in India that has helped to make this possible along with this tremendously important endowment of high class technical education. And it is now beginning to be felt in engineering and R&D and lot of the great American enterprises have standalone centers for both of these activities in India. India is becoming a hotbed of innovation, and my office in India said "Please, don't forget to mention that India is now, successfully, they believe, on the way to developing a $2200 price tagged compact car, so watch out Korea and Hugo and whatever; the Indians are on their way. India is a large consumer of energy, and if you had to put your hand on resource problem in India, its probably the lack of energy resources. its probably the lack of energy resources. India has developed, as you know, nuclear power. It's perhaps now depends three or four percent on nuclear, but there is some important new developments. India wants to import gas from Myanmar, from Burma, and from Bangladesh, and also gas and oil, either from Iran or Qatar or Turkmenistan or all three. Interestingly enough, that has to be done in pipelines, which will be built co-operatively with Pakistan, an important contribution, as you will see in a minute or two dealing with some of the most difficult problems in the continent. The second major change, first economic reform, has been changing political life in India. Now, for years the Congress Party, the heroes, of the struggle for independence against Britain, were on the unassailable in their ability to become elected in India and governed steadily with very few exceptions for at least first 45 years, and then gradually, smaller party gained strength. The most important of those was probably one gathered around the Hindu nationalists, the BJP party. BJP party has been in power of couple of times. They represent a new alternative pole. In the meantime Congress Party has fractured and so the future of governance in India, I think, is characterized by two trends: one, a two-party system as opposed to a one-party system, and secondly a two-party system based around the necessity for coalitions because there has grown up, in India, over the years, a plethora of new parties, some representing open marketers, some representing the traditional and some of the untraditional communists, some representing different tendencies in Hindu nationalism and some representing different tendencies in the traditional Congress line with varying views about socialism, and perhaps most important the growth of parties around the Dalits, the untouchables, the schedule caste, those who are given the advantage in Indian legislation of affirmative action and those who have begun to pick it up and move it forward in their own political parties. None of these is permanently united and none of them are permanently divorced, and we will see, I think, in Indian politics, in the road ahead this swirling of alliances and coalitions built around one of the two poles: the traditional Congress, more moderate, somewhat socialist-oriented, but now reforming an open market party, led by Sonia Gandhi and Manmohan Singh, or the BJP, with its inspiration coming more rigidly from Hindu nationalism and at the same time it's ability to attract alliance partners because of what governance has to offer. This changing of Indian politics will mean much more in the domestic life in India than I think it will mean in foreign policy, so let me turn, as a final major subject, to the third area of what you need to know about India: the US-Indian relationship. The end of the Cold War opened the door to change in Indian foreign and security policy almost conterminously as it did open the door to economic reform in a changing Indian vision of its domestic politics. And, in fact, if you wanted to characterize where I think India believes it is going in international terms, India believes it is well on the way to becoming a strategically important power in the world, and I think its probably not over drawn to say that the United States and India are well on their way to creating, I guess, what could be called at best a de facto strategic alliance for the future. The Indians, I think, quickly got the message that their old ally, the Soviet Union, a balancing factor in international politics, had disappeared, and whatever eggs they had put in that basket were no longer viable. That India lives in a difficult region. Interestingly, and we don't focus a lot on it, but India has had a troubled relationship with China, over the years. Problems with China and disputes over the border, and there are always two views on how it started, led to a war in 1962 on the border, between India and China, in which India was barely mauled. The US rushed to India's aid, it helped for a while to solidify a relationship, China of course, was then a nuclear power, and increasingly it became apparent to the Indians that the Chinese were strengthening their own position in Asia and the world. This was one of the factors which led, in my view, to the test in India in 1974 of a nuclear device. The Indians wanted to demonstrate that they had the technology; they called the test a peaceful nuclear explosion. That didn't pass the first page of The Washington Post truth test, but it was their view. We had a confrontation with the Indians over non-proliferation policy and we still do. We slight the notion that they would become a new nuclear power, and perhaps by doing so, encourage others, With the BJP in power just a few months, India resolved, once again, to show that it had a nuclear weapons capability, and ran a series of tests in the spring of 1998, including Pakistan, which as you know, has also become a nuclear power. followed in a few weeks by Pakistan. This led to American sanctions against both. It also led increasingly down a path which had begun already: to seek some kind of new definition in US India relationships, particularly after the test, and my older good friend, Strobe Talbott undertook this with the then Indian Foreign Minister, Jaswant Singh, and had a fascinating dialog, the subject of a book by Strobe within the last two years, for a new definition of US Indian relations. It was an interesting period because we had more frank and direct talk, we had more frank and direct talk than we had agreement, but we had more frank and direct talk than we had for a long period of time with the Indians on these critical issues. And it began to set the ground work for some changes. Some of those changes included a very significant visit by President Clinton to India, followed by a less friendly, less warm visit to Pakistan. But by a lot of continuity in US-Indian relations and much of what had begun in the previous administration, has been continued and re-emphasized by the Bush administration. And indeed, perhaps the most important correct step in that process, was contained in the July 18th 2005 communiqué on the occasion of Prime Minister Singh's visit to the United States, and the most important part of that change, was a new approach between the United States and India to the nuclear issue. India would not become one of the recognized powers in the non-proliferation treaty, that were treated differently because they possessed nuclear weapons, but India in effect would do some things on it's side and continue and strengthen some policies on it's side, if the United States would reopen nuclear trade with the civilian portion of the Indian Nuclear Program. One of those issues is that India must tell the United States which of it's facilities is civil, and open to safeguarding by the international community and which will remain closed and become part of their military nuclear establishment. This is important because, for the United States to resume nuclear trade, it will have to change existing legislation and existing legislation cannot be changed, in my view, without the serious effort on part of the Indians to include a significant portion of their nuclear program indisputably and perhaps irrevocably in the civilian side. India has said it's prepared to do that, to accept some other obligations too, in it's efforts to help us deal with the problems of proliferation, and so this will, in my view, become a significant part of what we will be seeing in Indian-American relations over the spring, in the summer. It is expected that near the end of February, in the beginning of March, President Bush will be in India and by that time, I think we should see clearly what the administration and the Indians will be doing with respect to the nuclear program as well as with respect to the Congress on American legislation. India has had concerns over its history with American Foreign Policy as well. India has been engaged in Kashmir with a zero-sum contest with Pakistan over control of the territory. The United States, for many years, treated Pakistan as a favorite ally in the cold war and India could not or would not be drawn into that position, and attempted carefully to maintain relations in both directions. Over recent years, Pakistan stepped up the heat for a while on Kashmir, supporting the infiltration of freedom fighters or terrorists, depending upon your point of view, in that area. India protested and pushed hard against it, did not want the United States to become involved as a mediator between Pakistan and itself over Kashmir, but nevertheless welcomed support. For many years, India considered that the United States failed to distinguish the differences in size and importance in growth potential and significance for the United States of India and Pakistan. A break began in that particular subject when President Clinton visited for a warm visit of a number of days, gave an absolutely stunning speech to the Indian House of Parliament, and went out of the way to begin, what has now become, something of a process of differentiation. That visit was followed, as I said by a very short stay in Pakistan, that policy has been picked up, the current administration has tried to move ahead itself in a number of areas, first looking again at US-Indian security policy, and space and in nuclear, and in high technology. We reached agreement between the former BJP government and the current administration on improving cooperation. Some in the US, to my view, wrongly, have favored India as a strong bulwark against China. The Indians themselves have made it clear they don't want to be put in that position, despite the fact that they have their own problems with China, but they have said very clearly they prefer to deal with China on diplomatic grounds. United States has begun to sell advanced military equipment to India, and India and the United States have talked about India's potential role in the UN Security Council, without the United States actually agreeing to say No to India on Security Council membership or Yes. So, let me, if I can, draw this to a conclusion, and perhaps open the floor for your questions. India and the United States have this growing, strategic partnership, relationship. India is a growing economy and we can look forward to more. Prime Minister Singh has set a 10 percent growth target for 2006. Most are skeptical that he will reach it, but certainly seven to eight percent, which has characterized growth over the last couple of years in India, is well within reach. That he will, in my view continue to make real changes with the past, that India will remain solidly in the democratic camp and attempt to improve its democracy, but the control in India will shift back and forth, between coalitions led, either by the Congress Party or the BJP, while India continues to attack the most serious problems that it has on its agenda. Education, particularly for the rural poor, increasing literacy, finding women's place in the society, and dealing with the problems of corruption. Indian aspirations for a role in the world community will increase, and as I said it will probably pass China's population in the third decade of this century. It's too early to call India, yet a global power, but it is certainly moving in that direction. India, in my view, will not pass China economically easily, but China too has a long standing problem which it cannot forever bury and that's the future of the governance, in that very very important country in which you have now an increasingly open economy effectively managed by a closed polity, and we know in fact that the formula is not one for perpetual success. And that there are increasing signs, in my view, both among the rulers in China, but the ruled as well, that increasing openness of some kind, perhaps very gradually, will have to take place. And so, China will have to face a problem that India resolved on its independence: how to be a democracy and grow. India has in fact in my view resolved that issue in favor of democracy and bringing growth along more slowly. China, has decided to grow but hasn't yet resolved how it can be, in my view, a strong and successful democracy in the future, and nobody says that it's chiseled in stone that you must be, but in my view it is almost necessary to have economic choice in place in an economy, eventually to have political choice in place in the economy and so we will see. A final word for us: India always used to be other side of every American globe. If not physically, certainly mentally, as we looked at it. That's changing. And the fact that you asked some one to come by and talk to you about what you should know about India indicates the fact that you too realize that the change is taking place. India offers great opportunities for the United States and the opposite is true. Perhaps the most vibrant and successful immigrant community in this country these days comes from India. The measures are numerous, but take a look at small town America, high school graduation reports, and see who are the valedictorians. It's an interesting measure, and take a look at the average wealth of the Indian immigrant family in this country and take a look at their enormous capacity to thrive and develop in our country, and I would suppose without venturing into too much hot water take a look at the crime reports. All measures in very human and individual way of what I have had to say. So it's been a pleasure to talk to you. India remains very important for us, don't forget about it, except for the first 10 points I made to you this morning, and now it's very much my privilege and pleasure to talk talk to you about your questions, your comments, your criticisms or whatever. Thank you.