The following is the text of Prime Minister Dr. Manmohan Singh’s address at the business luncheon hosted by Nippon Keidanren in Tokyo:
“I am truly delighted to once again be in Tokyo after almost two years. I take this opportunity to congratulate Mr. Yonekura on his assumption of onerous responsibilities as the Chairman of Nippon Keidanren.
I also thank him for his generous opening remarks and for the opportunity he has provided me to address this gathering.
The last time when we met, the global economy had just entered its worst crisis since the great depression of the nineteen thirties. The world’s leading developed countries were pushed into a severe recession, triggered by an unprecedented meltdown of the financial sector. Capital flows to emerging market economies dried up. Stock markets crashed worldwide.
Fortunately the world responded in a very timely manner. At the global level, India joined with other major economies in constituting the G-20 as the premier forum for decision-making on international economic issues. Thanks to the collective efforts of G-20, the world economy has gradually stabilized even though the recovery is still fragile. However, circumstances remain difficult even today. The recovery as I said is fragile and demand in industrialized countries remains weak. Protectionist sentiments have increased because of high unemployment.
Given the severity of the crisis it was inevitable that India would also be affected. Our economy slowed down from the 9 % growth rate it had achieved in the four years before the crisis of 2008 to 6.5% in 2008-09. But we responded with concerted measures to revive and sustain economic growth through a range of fiscal and monetary policies. I am happy to report that as a result our growth recovered to 7.4% in 2009-10 and is now projected to be 8.5% in the current fiscal year that is 2010-11. It is my expectation that we will return to a 9 % growth path in 2011-12.
I am confident that the strong fundamentals of the Indian economy will enable us to achieve our objective of double digit growth in the coming years. I do not underestimate the many challenges we face in achieving such high levels of growth. We need to close the infrastructure deficit, especially in the fields of power and transport and communication. This is a major constraint on our development and we shall give high priority to infrastructure development and modernization in the years ahead. We will rely on both public investment and public private partnership to achieve our infrastructure targets. We will also invest in education, health and rural development to ensure that growth is inclusive and broad-based.
Most of our investment is financed by domestic savings. I am happy to say that India’s saving rate has increased to around 35%. I am confident that it will rise to 40% of GDP. However domestic savings will have to be supplemented by foreign capital so that total domestic investment can be higher. During the last three years India has received cumulative Foreign Direct Investment worth over 100 billion US dollars. We have seen a slow down in recent months but I see that as being temporary.
We are determined to continue the process of economic reforms that will create a favourable investment environment and facilitate higher investment flows. We are continuing the process of reform of both direct and indirect taxes and hope to unify in due course all indirect taxes into a single Goods and Services Tax. We are pursuing reforms in the financial sector, capital markets, higher education and skill development.
Let me now turn to the question of what Japan and India can do together. Japan has always been viewed with great admiration by the people of India.
The Government and the people of India deeply appreciate the generous assistance which Japan has provided to us for building economic and social infrastructure. India has been the largest recipient of Japanese ODA since 2003. The highly successful Delhi Metro project has been followed by ODA assistance for Metro projects in Kolkata, Bangalore and Chennai. The Dedicated Freight Corridor project between Delhi and Mumbai, launched with Japanese ODA support, is designed to transform India’s freight logistics.
Today, more than ever, India’s buoyant economy, young population and large market combine well with Japan’s technological prowess, manufacturing skills and financial resources to create a win win situation for both our countries. I strongly believe that we can and must synergize our complementary strengths to impart momentum to Asian as well as global economic growth and prosperity.
We have witnessed a steady expansion of trade and investment relations between our countries in recent years. Bilateral trade has made a robust rebound in 2010 and should exceed 20 billion US dollars by 2012. However, you will agree with me that India-Japan trade is still at a low threshold, apart from being unbalanced.
I am happy to note that Japanese Foreign Direct Investment in India has grown substantially in the last three years. Much of this has been due to mergers and acquisitions. We welcome greater Japanese participation in Indian industry through Foreign Direct Investment. We seek the creation of new capacity in India’s manufacturing and infrastructure sectors and freer flow of high-end technologies.
It is a welcome sign that the number of Japanese companies with an established business presence in India has more than doubled in the past four years.
I have long believed that India and Japan must work together to create a business environment conducive to much greater two-way trade and investment flows. It was with this perspective that we launched negotiations for a Comprehensive Economic Partnership Agreement almost four years ago. I am happy to share with you that our efforts have finally succeeded and a mutually beneficial agreement is ready to be concluded.
India’s capabilities in the services sector and the knowledge economy are well recognized as is our global success in the Information Technology sector. Collaboration in this sector with Indian IT companies has brought significant benefits to our partners in Europe and America. We hope that Japanese companies will also take advantage of these opportunities to enhance their efficiency and competitiveness through expanded partnerships with India’s IT sector.
We also expect that the Comprehensive Economic Partnership Agreement will create new opportunities for India’s pharmaceutical industry in the Japanese market, helping to meet Japan’s growing demand for high quality and relatively inexpensive generic medicines.
I have already mentioned that India’s infrastructure deficit poses a major constraint on manufacturing growth and can adversely impact FDI flows. During India’s next Five Year Plan from 2012 to 2017, we envisage financial outlays of over one trillion US dollars on infrastructure projects. Private investment will play a large role in achieving this target. We would welcome a much greater role by Japanese industry in the development of economic infrastructure in India.
Japan is our partner of choice in the Delhi-Mumbai Industrial Corridor project. This is a mega project covering a length of over 1480 km across six States of India. It has the potential to become the hub of our new bilateral economic engagement in the area of manufacturing. Some of the notified investment regions are almost the size of Singapore in terms of their area. We welcome in particular the involvement of Japanese companies in the development of “smart communities” in the DMIC area.
With India’s rapid economic growth, the demand for energy has been rising rapidly. Japan, as a global leader in energy efficient technologies can play a significant role in helping us meet India’s energy needs in an environmentally friendly manner. We seek Japanese technology and investment in conventional as well as new and renewable energy.
Nuclear energy can provide our growing economy with a clean and efficient source of power. Cooperation in this area will enable Japanese companies to participate in India’s ambitious nuclear energy programme.
The weight of global economic power is shifting inexorably towards Asia. I am confident that irrespective of the current slowdown Japan will remain Asia’s most advanced industrialized nation for decades to come and will exert considerable influence on the global economy. India is participating fully in the rising tide of economic expansion in Asia. It is my hope that India and Japan will continue to work together for the creation of a broader Asian Economic Community.
In my more than four decades in public life, I have had the privilege of working closely with Japanese statesman and captains of Industry, during this period, I have steadfastly nurtured the vision that Japan must be an important partner in India’s economic development and transformation. Together we can contribute to global stability, prosperity and development.
As I stand before this distinguished gathering of leaders of Japan’s business and industry, I sense a new enthusiasm and a vibrancy that gives me reason to believe that my long held vision will be realized. I invite you to repose your faith in India. I assure you that we will spare no effort to make Japanese business welcome. Together, we can ensure the long term prosperity of our two peoples for the greater benefit of countries in our region and the world.”
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