Remarks by Franklin L. Lavin
Under Secretary of Commerce for International Trade
Opening Session Mumbai Business Summit
Grand Hyatt, Mumbai, India
November 29, 2006
Thank you for being here today. Thank you Dr. (Amit) Mitra for that kind introduction. It’s a pleasure to be back in Mumbai.
When President Bush and Prime Minister Singh met in March, the Department of Commerce was given a mandate: improve the policy framework and promote business between our countries. This Mission and Summit are my response.
Along with me this week are 239 American executives who are ready to do business. This Summit will introduce American participants to the Indian business environment. Indeed, almost half of the U.S. Mission participants have not been to India before.
I want to thank the Federation of Indian Chambers of Commerce and Industry and the Confederation of Indian Industries for their excellent work in organizing this Summit. Let me also congratulate the Government of India for their support and economic leadership. Indeed, this is the right time to be in India.
II. Good News and Good Progress
For some 15 years India has enjoyed high rates of economic growth. In fact, the growth in India’s economy last year is the equivalent to an entire Indian economy of 35 years ago. India’s trade with the world is booming and has more than doubled in the past three years. Trade with the U.S. alone is more than India’s trade with the entireworld in 1987.
Much of this success is due to the reform agenda of the Indian government and the work of the Indian business community. Together with the U.S. Department of Commerce and U.S. companies, we have been engaged in the Commercial Dialogue, co-chaired by Secretary Pillai on the Indian side, and by me to promote economic reforms.
Let me give a few examples of progress on reforms that are making India a more inviting place to do business:
1) In civil aviation, we signed an open skies agreement that has increased the number of flights and passengers traveling between the U.S. and India by more than 60 percent in a little more than a year.
2) India has begun to lower tariffs on industrial goods, from 15 percent on average to 12 ½ percent this year.
3) The extension of patent protection to pharmaceuticals, agricultural chemicals and various food products will encourage innovation in India.
4) And in the past two years, India relaxed investment caps in areas like telecommunications, single brand retail and civil aviation.
At the same time, challenges exist. Let me suggest a few steps that will allow for a better environment for business and improve the lives of Indians.
1) First, lifting ownership caps and opening the Indian economy to international participation will bring greater efficiencies and help Indian consumers. For instance:
- Opening India’s retail sector to foreign multi-brand retailers will allow Indian consumers access to the best products at the lowest prices and will improve supply chain efficiencies.
- Similarly, eliminating foreign equity caps in the financial services, banking and insurance sectors, and allowing U.S. companies to compete in the pensions sector will let investment flow where it is needed most. Opening markets will lower borrowing and premium costs, increase the volume and effectiveness of capital allocation, and increase the product offerings Indian consumers deserve.
As of 2005, India had received $45 billion in foreign direct investment, with $8 billion of that from the United States. Compare that to Singapore, which has received more than $186 billion in FDI, with $48 billion from the United States.
2) Second, India’s tariffs are still high compared with the rest of the world. India’s tariffs average more than 20 percent, and in some cases are more than 100 percent. Compare India’s average tariff on industrial goods of 12.5 percent to the U.S. 4 percent average.
3) Third, the creation and enforcement of laws that protect the rights of patent and copyright holderswill encourage Indian entrepreneurship and creativity by protecting innovations and brands. Robust intellectual property rights protection will encourage investment and give India an edge in environments such as healthcare, energy and aerospace.
It gives me no joy to report that in the World Bank’s Ease of Doing Business study India ranks right at the bottom-173 of 175 countries in the area of enforcing contracts. An estimated 74 percent of software in India is pirated, and India is one of the world’s leading manufacturers of counterfeit pharmaceuticals. The entertainment industry in India has suffered from inadequate protection of its movies and music. Indians are an endlessly innovative people, and when they invest in creative pursuits they deserve to benefit from their hard work.
There are other areas where we can work together to improve the U.S.-India economic relationship including:
- Allowing more U.S. investment in broadcasting and telecoms;
- Creating and enforcing clear, consistent and transparent laws and regulations; and
- Eliminating non-tariff barriers to trade in areas such as medical devices.
The question in front of us is this: is India on a long-term path of reform, or are we simply looking at “the Indian moment?” Will these reforms continue, or will India pull back? The Indian people and their government will answer this question.
The United States supports India’s reform efforts, and we want both of our economies continue to expand and improve. What I would like to see is for every Indian company to have as much access to the American market as possible, and for every American company to have as much access as possible to Indian consumers.
I begin this Summit with a sense of optimism. I know the companies that I have brought with me from the U.S. are serious about doing business in India.
For years, Indians have told me that they want to do business with Americans and are just waiting for the right opportunity. To them I say: your wait is over. Your opportunity is today. We are prepared to work with you, and we are ready to be your partner in a world that is getting smaller and is within reach right now.