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Address by Ambassador Meera Shankar for the Boeing Distinguished Guest Lecture at St. Louis University - on "India as an innovation hub and opportunities for India-US Economic Partnership"

St. Louis, MO
March 1, 2010

1. I am honoured to deliver the Boeing Distinguished Guest Lecture at the St. Louis University. Like most countries in the world, India entered the jet age on the wings of a Boeing aircraft. Today, Boeing has multifaceted partnerships in India that showcase the diversity, depth and growth in the India-US economic relationship. 

2. In 2006, Air India placed orders worth USD 11.1 billion for 68 Boeing aircraft; orders have come from other Indian airlines, too. Boeing has also been at the center of the rapidly growing defence trade between India and the United States. Today, however, Boeing’s relationship with India transcends trade. Through its partnerships with Indian IT giants, aerospace companies, defence companies, top universities and, now, through its own Boeing Research and Technology India Center, Boeing is demonstrating how India-US economic engagement is contributing to the economic transformation in India, creating business opportunities for the United States and helping US companies innovate and stay competitive.

3. The Indian economy has been undergoing a remarkable transformation since the reforms of 1991 which deregulated the economy internally while liberalizing trade and investment policies. Over the past two decades, we have been the second fastest growing major economy in the world, and in recent years, reached a growth trajectory of 8-9% a year. This growth has been largely driven by domestic demand and financed by domestic savings, and it’s most visible impact has been on the services sector, which now accounts for two-thirds of our GDP. More recently the manufacturing sector has also turned around and is now witnessing rapid growth and expansion.

4. Growth has been accompanied by deepening integration into the global economy, which has created immense opportunities for our international partners. Just in the past five years, our imports increased nearly four times; and, foreign direct investments nearly seven times. 

5. The global economic and financial crisis slowed down our growth to about 6.7% in our fiscal year that ended in March 2009, but we are already beginning to see the return of economic momentum, with growth in the fiscal year ending March 2010 likely to be around 7.5%. In December 2009, the manufacturing sector saw a year-on-year growth of 16.8% - the highest monthly growth in the past two decades. In January 2010, business confidence in India reached a two-year high. We are confident that we can soon return to a sustained high growth path of 8 to 10%. 

6. India’s sustained economic growth will transform it into one of the leading economies in the first half of this century, create enormous economic opportunities and turn India into a potential anchor of global economic stability.

7. India’s economic transformation is being driven not only by resources but also by innovation in its broadest sense. New developments in design and development, processes and systems are creating new products that suit our circumstances and contexts; setting new standards in cost-effective manufacturing and service delivery; and, creating new ways of delivering products and services to consumers. It has made our once heavily protected manufacturing sector modern and globally competitive. It has fuelled unprecedented growth in information technology, communications and the financial sector to transform the services sector, which now accounts for two-thirds of the GDP and has a had profound sociological impact on our society. And, it is turning India into a global hub for innovation, design and development and manufacturing.

8. More and more global companies are discovering that India is an attractive location for design and product development for their global operations and for increasing their competitiveness. Let me give a few examples. I have already spoken about Boeing’s far-sighted move in India. CISCO set up its second global head office in Bangalore to use it as a base for both global and Indian markets. Kyocera Wireless has made Bangalore a global center for innovation in wireless technology. WIPRO, an Indian venture, teamed up with leading US companies to start a global innovation hub in Bangalore. Airbus is planning to do some of its design and development for the A350 aircraft in India.

9. When we consider products designed especially for the Indian market, two examples come to my mind. GE Healthcare developed a portable ECG machine for the Indian market, which can give an ECG report for about USD 1.0. The total design and development cost in India was about half a million dollars. It has made healthcare more affordable for poor people in India and would also be relevant for other developing countries. HP developed Script Mail in India that makes electronic communication easier for people who speak languages that cannot be typed on keyboards. And, India’s own Tata has redefined the cost of manufacturing cars by coming out with the Nano, a car that meets the highest fuel efficiency norms, at 2500 dollars in the Indian market. 

10. Once, Indian automobiles were known as “fossils on wheels”. Today, by opening up to international investments and competition, India has emerged as the largest market for small fuel-efficient cars and, in the process, as an international manufacturing hub for small cars. Suzuki, Hyundai, Volkswagen are some of the auto manufacturers using India for their international small car markets. 

11. Indian telecom companies have used innovative business and infrastructure development models to meet the growth in the cellular market that has taken connections from less than 50 million to over 500 million in the past decade and made tariffs one of the cheapest anywhere in the world. India’s pharmaceutical sector is expected to be one of the five largest in the world and emerge as a global research and development hub. India is also emerging as a leading center for research and development in biotechnology and information technology.

12. What India brings to the table is low-cost, high-tech design and production capabilities or what has been described as “frugal engineering”. India’s first lunar mission, Chandrayan-I, was developed and launched at around one-sixth the cost of similar moon missions elsewhere. And, today, India manufactures the most cost-efficient, small capacity nuclear power plants.

13. There are several factors that are driving innovation in India. One, of course, is competition. Industries in India that have seen the highest levels of competition have also seen the highest level of innovation. Economic reforms, therefore, have been a prime driver of innovation in India. Second, India is one of the largest economies with the second largest population in the world. Yet, per capita income levels are still very low. So, manufacturers in India have to address the twin questions of scale and affordability, which requires new approaches to design, development, manufacture and delivery of goods and services that respond to Indian conditions, culture and circumstances. This focus on innovating for the Indian market is fueled by the fact that for many global companies, India is one of the prime markets for the future. 

14. Third, India has one of the largest pools of scientific and technological human resources. However, to sustain this growth of 8 to 10% we need to both augment numbers and improve quality. National policy recognizes this as critical both for empowering our people and ensuring that growth is inclusive and benefits all sections of our people. We are now undertaking ambitious reforms in the education sector, covering the full spectrum, school, university and vocational training and skill development. The higher education sector is poised for substantial expansion with the government committed to building at least 40 new universities, establishing 400 new colleges in backward districts and connecting 18,000 colleges and 400 universities in the country with broadband connectivity. 

15. Fourth, India’s public research and development infrastructure is becoming stronger in recent years, especially in basic research. Publicly funded research institutions are reorienting themselves to work in partnership with the private sector to accelerate commercialization of new ideas and products. Communications infrastructure has expanded rapidly with the spread of mobile telephony, while broadband connectivity, where current penetration is shallow, is also on the verge of rapid growth. The challenge of improving physical infrastructure, particularly transport and energy remains and, is a key national priority. India’s overall R&D expenditure, which used to be below 1.0% of the GDP is targeted to reach 2.0% of the GDP by 2012, which will bring it roughly to the standards in the developed countries. Fifth, India has strengthened its IPR regime and is fully compliant with commitments under WTO. As it emerges as both a producer and a consumer of knowledge, it has a strong interest in protecting intellectual property. Finally, venture capital and private equity funding are now more easily available.

16. Innovation is becoming not only an engine of success in the market, but also a tool to address pressing social and economic challenges; helping not only to meet the demands of the urban rich and the globally networked companies, but also helping to create opportunities to meet the aspirations of the rural poor. Increasingly, development challenges are not seen only as a responsibility that the government has to fulfill, but also as an opportunity that talent, enterprise and innovation can address. 

17. Using satellite imagery, information technology and community participation, nearly 1300 villages in Karnataka have transformed their watershed management and created new hope for their future. In a new programme, satellite imagery has already helped generate 2000 underground water maps covering 45% of the country, which is enabling more efficient development of irrigation and drinking water projects. n-Logue, an IIT Chennai incubation, has established 2,500 village information kiosks with dedicated broadband connectivity, offering agricultural, health consultation, education, and insurance services. ITC, one of India’s leading companies, has set up e-centres with computers and satellite connections in 6000 villages that provide farmers with market information and advice on production, and has helped eliminate middlemen. A social networking site has linked a million fishermen. Solar Home Systems has worked with banks to finance solar lighting to the poorest families and has already benefitted tens of thousands of people in India. SKS Microfinance has combined smart cards, rural ATM and internet connections to provide microfinance loans to 200,000 people and create 8000 self-help groups with 20 female members each for microfinanced businesses. Indeed using technology for better delivery of public services will be key to the government’s objective of “inclusive growth”. 

18. These are glimpses of the exciting new changes that are taking place in India. And, they are the manifestation of the energy, enterprise and aspirations of an increasingly young India, where nearly 50% of the population is below the age of 25 years. And, as much as resources, it is innovation and imagination that will be needed for us to reduce and eliminate poverty from India; build a modern and efficient infrastructure for the 21st century; meet the five-fold increase in demand for power over the next two decades; switch to clean and renewable energy and make energy use more efficient; achieve a quantum leap in agricultural productivity; expand transportation networks and education and healthcare facilities; and, manage our resources. 

19. What is relevant for domestic success is also necessary for global success. In a world of relentless change, swift diffusion of technology and ever-increasing inter-connectedness and inter-dependence, countries and companies cannot afford the false comfort of retreating behind protective walls, but will have to work together more closely to succeed. Innovation and appropriate global partnerships and presence would be necessary to succeed both in home markets and internationally. 

20. I believe that in a globalised world, Indian and American businesses are natural partners. Our two nations have a close and deepening political and strategic relationship. We have growing ties of kinship. Our businesses operate in a similar political and social environment, defined by democracy and diversity, and by the rule of law and principles of public accountability. We are open societies with free media and communication, which equip us well to work together in a world of ceaseless change and information flows. We share a culture that emphasizes and values education and enterprise. We have similar approaches to corporate management and complementary strengths. Our two economies, despite their different scales and level of development, generate the bulk of their GDP in the services sector. And, we have a proven track record of partnership in innovation and global success. 

21. Indian companies recognize this reality. They are already reaching out across the world. Over the past four years, Indian overseas investments have grown four times. The United States is the largest source of technology cooperation for Indian companies and increasingly a prime destination for Indian investments. Indian FDI in the US is across a broad range of sectors from Information Technology to hotels to steel to automobiles and is contributing to the creation of jobs and growth.

22. Equally, most major US companies have investments in India, making the US one of our largest sources of direct foreign investments and the largest source of portfolio investments in India. US companies have pioneered the development of India as a global innovation hub and today account for more than 50% of such ventures. Indeed, Indian and US companies have helped in many ways to shape the knowledge economy.

23. As the Indian economy continues its growth, as the global economy recovers and as the US economy rebounds, our trade and investment relationship will grow exponentially in both directions.

24. We look to more active engagement by US companies in the huge business opportunities in the infrastructure sector, where we need investments of USD 500 billion in the next five years, or in the consumer market, which is estimated to require investments of USD 180 billion in the next decade. These investments could also act as a stimulus for the US economy. Similarly, Indian investments in the US will continue to grow at a rapid pace. 

25. But, we must also make our relationship relevant in meeting the challenges of the 21st century. As we have done in the case of the knowledge economy, we can help shape the green economy of the future. India has ambitious goals for solar energy, wind energy, nuclear energy and clean coal technology as well as energy efficiency. If we can develop new technologies and make them affordable and reliable, we will enhance our ability to provide new economic opportunities for our people and create new clean energy jobs. The civil nuclear agreement, which was both a symbol of and an instrument for the transformation in our relationship, has opened enormous new opportunities not only to boost bilateral economic ties but also address our shared concerns on energy security and climate change. 

26. Drawing strength from an impressive history of individual and institutional links in the education sector, we can turn education into an area of strong and mutually beneficial cooperation. In the past, the India-US partnership ushered in the Green Revolution in India. Our cooperation could now catalyze a new revolution in food production that raises productivity and reduces risks. Our partnership can be of great value in the field of healthcare, medical research and developing vaccines for global health challenges.

27. As space assets become increasingly important for communications, managing resources and economic activities, India and the United States have exciting possibilities for cooperating in this sector. India’s first moon mission – Chandrayaan I – carried a U.S. experimental payload which helped to discover water on the moon for the first time. The rapid expansion of aviation and aviation infrastructure in India also presents enormous opportunities for trade and long-term partnerships. In order for the U.S. to fully realize the potential for high technology commerce and shared endeavours in innovation, a facilitative export control framework in the U.S. would be important. This would act as a great catalyst for increasing our trade and cooperation in high technology.

28. We must seize the opportunities to build on the pioneering models of cooperation that India and the United States have created and on all that we share to define a new partnership for the 21st century that not only creates jobs and wealth in both countries, but uses the tremendous scope for innovation in our partnership to find solutions for the challenges of our time and in creating prosperity for all those who we share this world with. This is the vision that Prime Minister Manmohan Singh and President Obama outlined during Prime Minister Singh’s visit to Washington DC in November 2009 and which we will endeavour to fulfill. 

Thank you.