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Keynote Address
Centre for Strategic and International Studies (CSIS) conference on "U.S. - India Economic Engagement: Deepening the Commercial Partnership"
"India's demographic transition: opportunities for partnership"
Washington DC; April 15, 2015; 4:15 pm
Dr Ramesh Wadhwani; Chairman and Chief Executive Officer, Wadhwani Foundation;
Dr John Hamre; President and Chief Executive Officer, Centre for Strategic and International Studies;
Mr BJ Panda; Member of Parliament;
Ambassador Taranjit Singh Sandhu; Charge d' Affaire, Embassy of India, Washington DC;
Mr Arun Kumar, Assistant Secretary, US Department of Commerce;
Mr TN Ninan; Chairman, Ananta Aspen Centre and Chairman, Business Standard Limited;
Friends, Ladies and Gentlemen.
I. Introduction
1. I am pleased to be present here today, at the day-long conference organized on the topic of "Deepening the US-India commercial partnership: the first year of the Modi Government". I am grateful to the Centre for Strategic and International Studies (CSIS), the Wadhwani foundation and the Ananta Centre for having organized this event and also for having invited me to deliver the keynote comment on "India's demographic transition: opportunities for partnership".
My remarks will be in three parts: spell out the demographic dividend; talk about what we need to do; and then about how the US-India partnership can help.
2. India, as we well know, is on the brink of a major demographic shift, with the proportion of working-age population between 15 and 59 years likely to increase from approximately 58 per cent in 2001 to more than 64 per cent by 2021, adding approximately 63.5 million new entrants to the working age group between 2011 and 2016, the bulk of whom will be in the relatively younger age group of 20-35 years. We are fully aware that demography is not destiny. Demographic changes pose a challenge and an opportunity. If we can give better health, education and skills to the younger cohorts of the population, we will have more workers - especially in the productive age groups, more incomes, more savings, more capital per worker, and more growth. We will also reap the dividend of a higher female participation in the labor force, given that these demographic changes are typically associated with significant fertility declines. On the other hand, if we are unable, for some reason, to rise to the challenge, we will face significant obstacles, not only to growth, but also to preservation of social harmony and public order. The imperative of managing India's demographic transition, therefore, is most urgent and profound.
II. What India must do and is doing to realize the demographic dividend
3. Our Government is acutely aware of the challenge that India's demographic transition poses to its future growth trajectory and a series of steps have been put in place to ensure that this historical opportunity is seized to its fullest potential.
Essentially, to realize the demographic dividend we need to create the conditions for double-digit growth and to ensure that growth is accompanied by robust employment creation because it is the latter that will create inclusiveness.
II.A Sustaining Double-Digit growth
Public investment push: The Budget aims to step up public investment on infrastructure by nearly US $ 12 billion, and also creates institutions which will leverage much more money from the markets on the back of committed Government funding. We will take steps to revive the public private partnership (PPP) model in infrastructure, so that eventually, the private sector can play a much more important role in creating long term assets like roads, airports, ports and railways infrastructure.
Make in India, Attracting FDI and easing Cost of Doing Business
In order to supplement and assist the 'Make in India' programme in achieving its objectives, our Government relaxed very early on, the foreign direct investment (FDI) limits in defense manufacturing - from 26 per cent to 49 per cent - and in railways infrastructure, where no FDI was allowed earlier, to 100 per cent FDI. Besides, a large number of clearances, approvals, licenses and permits have been simplified, so as to make it easier for companies to set up manufacturing units in India.
II.B Inclusive growth
Raising agricultural productivity: Ambitious schemes have been started to improve soil fertility on a sustainable basis; enhance the coverage of irrigation to cover the field of every farmer, as also by improving water-efficiency; augment the existing supply of credit to all categories of farmers, especially the small and marginal ones; and create a National Agricultural Market, which will ensure that the farmer gets the best price for his crop.
New schemes in the budget for providing comprehensive social security
Financial inclusion program: Jan Dhan
III. How US-India Partnership can help realize Demographic Dividend in a way that is mutually beneficial
III.A Background
There were two paradoxes about the relationship in the past:
- even though the people-to-people relationship was so good based on, of course the large Indian diaspora, the government-to-government relationship had lagged behind
-- the second paradox was that even though economic, trade, and investment flows were growing between the two countries, there were sharp differences at the policy level, contributing to trade tensions.
Both these paradoxes are being resolved because under Prime Minister Modi, this partnership is at a new level and trajectory of mutual trust and cooperation. The two visits by President Obama to India and the visit to the US by PM Modi have signalled this new phase/era for the partnership. The spirit of our relationship has been more than amply summed up by the guiding mottos of the two Joint Statements released during these visits: “Chalein Saath Saath: Forward together we go”; and “Saanjha Prayas, Saanjha Vikas: Shared effort, progress for all”.
III.B: The opportunities in the partnership
What are the substantive opportunities? There are several but in the interest of time let me mention some key ones.
At the heart of this relationship is the importance and contribution of the 2 million Indian diaspora.
Diaspora
India, Indian businesses and persons of Indian origin also play an equally meaningful and significant role in enhancing US prosperity, growth and progress. A large number of Indian companies work here, invest billions of dollars in US counties and cities, employ thousands of US citizens and contribute handsomely to US innovation, research and development. Indian Americans who have settled here and now number nearly 4 million people are building businesses in Silicon valley and other high tech innovation hubs; are holding positions of responsibility in federal, State and city administrations; are imparting education in US universities and colleges and are contributing in significant ways to the US political processes. Nearly 100,000 Indian students are studying in academic institutions of this country.
Immigration
The Indian IT industry has enjoyed a special relationship with a large number of US companies, which has evolved from providing low-level technical support to creating value added projects and supporting high end research and development (R&D) and innovation. This relationship is recognition of the skill and capabilities of Indian engineering and software graduates, who are proficient in English and willing to adapt to varying organizations and cultures. Indian IT companies and Indian IT professionals, employed in the US on short-term visas, have contributed to the economy of this country, by providing jobs, spurring innovation and creating world-class products. While every country is sovereign in deciding its own immigration policies, I would urge the policy-makers in the US, to bear the contribution of this segment of Indian industry and professionals in mind, while enacting laws in regard to immigration. The benefits are totally mutual: Enabling highskilled immigration alleviates US human capital shortages, improves economic/corporate adaptability, boosts competitiveness of the entire economy and increasingly provides the entrepreneurial zeal America has always relied on. High-skilled professionals are a dynamic input just like technology for the US.
Totalization
A related issue is totalization. Indians contribute—according to research done by Jacob Kirkegaard at the Peterson Institute--about $3 billion annually to the US government by way of social security contributions which they will never receive back. This is like an aid program that Indian workers run for the US government. I would urge the US administration to create a framework and start a process so that we can rectify what is really a very unjust situation. I am confident that the US will take up this matter soon.
Technology
We need technology and the US as one of the main producers of technology is a source of opportunity for us.
But we also need to understand each other on a key technology related issue that of IPRs. India is fully committed to protecting property rights. As major producers of copyrighted materials—films and music—we have much in common with the US.
On pharmaceuticals, as a responsible government, we have to accord highest priority to providing affordable access to medicines and health care for hundreds of millions of very poor people. But we will do this in consistence with our international obligations and making sure that we do not undermine our reputation for being a country that provides rule of law and protection for property rights.
Over time, as we grow, so too will our need for technology. Outsiders need to recognize our domestic health imperatives.
Taxation
I will spell out the tax vision for India in fuller detail tomorrow at the Peterson institute.
Investment
As a signal of our commitment to attracting FDI and easing the costs of doing business, and the importance we attach to the role of the US, we are moving steadily forward in negotiations on a Bilateral Investment Treaty (BIT), and our technical teams have met recently in New Delhi to carry the process forward.
Education
The US has also offered to support India in achieving the goal of preparing young Indians for 21st century jobs, through new partnerships to share expertise and global standards for skill development in India. Areas of collaboration are being identified in skill development, ranging from establishing quality assurance systems for skilling certification standards, setting up skill development centres, nurturing and promoting social entrepreneurship and strengthening innovation and entrepreneurship eco-systems. Through the mechanism of US-India Higher Education dialogues, the partnership between the two countries in the area of community colleges promises to bring to India’s vocational training system, state-of-the-art standards for teaching and pedagogy, private participation in skill building, and lateral transition between vocational and regular educational systems. The US helped in setting up the India’s premier institutes of excellence, namely, the Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs); it will again extend a knowledge partnership in supporting the IIT at Gandhinagar. Another initiative will help upgrade India’s teaching standards in higher education by supporting upto 1,000 visiting US academics in Indian universities for short-term teaching and research programs. The US India Business Council (USIBC) has signed a MoU with the National Skill Development Corporation (NSDC) to support setting up of skill development centres in India in multiple sectors such as life sciences, health care, tourism, hospitality, automotive, electronics, and aviation; the Foundation started by Dr. Romesh Wadhwani in 2000 has on-going high impact initiatives in India for skill and entrepreneurship development – over the next five years, the Foundation intends to significantly scale up and accelerate their on-going initiatives with an aim to create and fill up 25 million jobs by working with the new Ministry of Skill Development and Entrepreneurship.
Smart Cities
Another collaboration which is yielding positive outcomes is our partnership in ‘smart cities’. The US Trade and Development Authority (USTDA) has signed Memoranda of Understanding (MoUs) with each of three cities, viz., Ajmer, Allahabad and Vizag, where the US will assist India’s efforts in this direction. Under the terms of these MoUs, the USTDA will provide assistance in preparation of master plans and in creation of infrastructure necessary to convert these places into smart cities. High quality conferences and seminars have been organized by US agencies and businesses in India to bring together representatives of Governments, at the Federal, State and local levels, and those of the US corporate entities who have shown interest in participating in the Indian smart cities programme. I have been given to understand that delegations from India will be visiting the US to study selected cities which have ‘smart’ features. We are assured that with all that is being done, investments from the US into India will step up substantially in the future and US companies and businesses will create a large number of productive jobs in India.
Renewable energy: Solar
We have made progress in providing greater market access for American companies so that they can be partners in the PM’s ambitious plans for renewable energy in India. Going from 20 to 100 gigawatts by 2022.
IV. Conclusion
The potential of India is considerable and this government’s intent on raising Indian growth to a sustained double-digit trajectory and hence realizing the demographic dividend. The US can both contribute to this process as well as participate in the opportunities that the Indian future will create. In these and other endeavours, the US will continue to remain India’s key strategic ally and partner, and the two countries, the world’s oldest and largest democracies, which share so much in common, will help in creating a world order which is just, humane and founded on principles of respect and friendship. The basis for a 21st century relationship for a 21st century country has been established. Let us build on it. Chalein Saath Saath.
Thank You
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