1. Thank you very much for the invitation that Mr. Shukla, TiE, and all its colleagues have extended to me. This is my seventh and last day of my trip to the United States and I must confess that it has been a fascinating experience for me. I've had several opportunities in the past to be here and to speak and to interact with people, but this was a trip with a difference.
2. In seven days I have interacted with senior members of the US government. I've had an opportunity to speak at think tanks, to speak in some of the top universities and to meet and discuss with several separate groups in the US, groups of entrepreneurs, groups of think tanks, groups of bankers, those dominated by those who influence governmental decision making at Washington. And at the end of seven days, I don't know, I haven't kept a count but probably this is my last and maybe more than the 20th such meeting that I've had. And I go back as a better informed person.
3. I think one thing this whole discussion has established that the present Government in India is willing to talk not only to its own industry and its own people, but its reaching out to a body of international investors, both persons of Indian origin and elsewhere, those who can be of great utility in the India growth story. And I've, not to flatter anyone here in this room, but probably the eye opening experience has been in the Silicon Valley. It's an area where you see the virtues of technology being converted into commerce, and where entrepreneurship is at its very best. And that convergence of entrepreneurship and technology has been enabled with a great Indian participation. It may not be a bad idea if those who obstruct reforms are also invited by you here, so that they go back with valuable experience.
4. Earlier I used to say that we must send all the Indian communists on guided tours of China so that they can learn the growth story, but I think that sending them here would be a far more valuable experience. And this also answers the question where it pays to be innovative, it pays to invest in education, it pays to invest in technology, and more important that it pays for any country to unshackle the energies of people.
5. I've never had a doubt about my own conviction, that we've had phases of a wasted period in India. I'm quite willing to give the benefit of doubt, though I don't necessarily agree with the Nehruvian model myself, but I'm willing to give it benefit of doubt because private capital was hardly available in the 50s and 60s. But what's happened in India in 1991, if it had been predated to 1970s, the Indian growth story would have been different.
6. But in 1970s we made a fatal mistake of believing that the acceptable model is not a model where you increase productivity, it's not a model where you unshackle the energies of people and allow them to grow, but you restrict them and you just distribute the existing resource. Wealth creation was considered to be an evil, and distribution of poverty was considered to be populist. So that's the 1971 model, and that 1971 model converted the 70s into probably the most wasted decade in India's history.
7. If you now look at the reform process 1991 onwards, and it continues today, a lot of what we are trying to do is to undo the 20 point program of the "emergency" whose 40th anniversary we will have three days from now. So a lot of retrograde which were being marketed as progressive and populist. And I think the last part of the 80s continued to be a wasted decade.
8. We did progress the next 15-18 years, and somewhere down the last decade, and this was only unnecessarily having gained from the fruits of entrepreneurship and opening out, we again started thinking that the old model is a more popular model. You waive off bank loans, probably that is the more acceptable model in politics, but as Mr. Shukla just now mentioned in the opening comments, I think you put it very precisely when you said, that India has now changed and the exasperation in the last decade was why are we not growing and why are we not reforming.
9. So the sickness, policy paralysis, all these phrases were being used because the country knew about its potential and the fact that its potential was being held back. And that is precisely the reason that you've had Indian elections ordinarily influenced by a host of actions. They could be influenced by the 1984 riots, and election could be influenced by the corruption in Bofors deal,, and the election could be influenced by the emergency, the elections could be influenced by Mr. Bajpai's victory during the Kargil war, but the last election was a precise election which was fought entirely on Governance issues, and therefore the restlessness of people both in Government and outside that we must now deliver fast, that is something is on the increase. And it is for this reason that we've now become a highly aspirational society.
10. Let's not forget, the size of the Indian middle class today is equal to the population of the United States. And below the middle class there is another restless aspirational class. They want to get out of villages, they want to get out of slums, they want to get a quality of life, they want to send their children to the best of educational institutions. If you've followed the media reports, and I've done it in the last one week that I've been here till today, and there will be two interesting new items about two brothers getting into the IIT from a village in Uttar Pradesh, and there's a reference to another backward area in Bihar which has sent 18 student to the IIT this time. So the quality of people getting into these institutions now, the depth of the areas from where they are coming, has also expanded. It's not merely the urban and the more fortunate to be educated in a different manner, it's a class which is spreading. And I think this is extremely important.
11. As this happens to be my last meeting I'd just like to share some of the interesting observations that I've gathered back as my own feedback from what people expect from India and Indian policymakers. Investors expect a stable policy regime. Investors expect to work under a particular environment, and they have a particular dislike to any form of unpredictability. We didn't invest keeping these unpredictability's in mind and therefore are entitled to a stable regime.
12. The second important message I get from particularly this part of the United States is that in whichever area we continue to restrain the energies of Indian people we won't be helping the country, we won't be helping the Indian economy. There's a huge amount of entrepreneurship which is being built in India, and therefore that entrepreneurship has to be allowed, to be unleashed rather than restrained. Now a very large number of you, who moved at different times in the last four to five decades from India, found this environment of unleashed energies more conducive to your own goals. At a time in the 70s and 80s where state was considered to be a hurdle, where we were enacting laws, the basis of which size is evil. So the whole old concept of laws was that if it's big it's evil and therefore it must be stopped. Now you left India in that kind of environment, came to a foreign soil and were able to utilize the freedom given to you, the environment given to you , for creativity to the fullest of advantage. It took us at least 20-25 years to learn from these success stories and try to emulate these examples.
13. The third very important point is how technology is going to create jobs. It is impossible for any society to divide technology and therefore to restrain technology is something that is completely impossible. You've used it as a job creator, for instance we in India today have started introducing that culture into Government, and the rapid pace at which reforms can be itself implemented, and I have two recent very interesting stories in this regard, with the kind of database that technology platforms have created for us. I've given this example in the past, the penetration of India's insurance sector is only 20%. Now we've decided for weaker sections in India to come out with accident and life insurances, it will be partly subsidized by the state. We launched this scheme, the Prime Minister launched it on 9th of May, and in the first 33-34 days, using the technology platform, we were able to expand it to 110 million people in a period of 34 days, we used the technology platform.
14. In the financial inclusion program, the Indian banking system extended to only 58% of India's population, 42% of the households were beyond the banking system. In a period of three months using the same platforms, we've now been able to reach 155 million homes, which is something extraordinary. And now our financial inclusion, even if some of the accounts have no money, is well into the 90s, for what was only 58% till few months back. We then decided to put money into these accounts, and it becomes an automatic bank transfer. So all kinds of state aid programs, whether it is widow pensions; old age pensions, support group, student scholarships, and finally the cooking gas subsidy. The cooking gas subsidy since first January we started the experiment, using the technology platform we have been able to transfer to 125 million people, homes, in India, directly into their bank accounts, so a lot of these nonfunctional accounts which we had, have now become functional. The net effect of this is that in the year 2013-2014, on petroleum related subsidies if we were spending X, last year we spent less than X since because toward the later part the prices of oil were softening. This year because of the use of technology also linking petroleum to the market with kerosine subsidies still intact the amount I spent is going to be only about 30% of what I spent two years ago and my savings is a huge amount and it is that huge amount that I've been able to divert into these social security schemes, reduce the fiscal deficit, because oil is involved and there's a lot of foreign exchange outgo thus it will reduce the fiscal deficit, reduce the current account deficit and have a lot of additional resource for spending into infrastructure itself.
15. We've additionally been able to use the falling oil prices to transfer a lot of benefit to the consumer, but we've taken away some part of it into a cess which is an infrastructure cess. For every one rupee of that cess I get 10000 crores extra to be diverted into infrastructure so the present cess is around 8 rupees so I get 80000 crores extra just for diverting it into infrastructure. So the reduced oil prices, the use of technology platforms for making these transfers, now these incentivizes us. Just before leaving I requested the concerned Ministry that the cooking gas experiment has been very successful why not to replicate it on kerosine also so the diversion, the smuggling, the duplicate connections all will get eliminated. And without any fear or protest in the society you've managed to save a huge amount of money and are able to divert it both for social security and also for infrastructure creations.
16. Since I am here at the hub of technology itself. This is the use of technology itself for effective governance itself. An important point that was made just now is the maintenance. And this has been my experience visiting Stanford yesterday and Columbia, New York where I had an opportunity to go several times in the past. I think we need a point that was well made just now, to expand the number of these institutions of excellence and therefore the present Government has decided with the constraint of faculty that during this tenure we will make sure that every state in India, that includes the northeastern states, every state from Kashmir down to Kerala, and North to South, every state must have an IIT every state must have an IIM. And initially some of them may have the faculty issues but they will all rise to the level of expectation and in the first two years we managed to set up in a large number of states and the pace with which its going I think institutions like the IIT & IIM, by the end of the five year term of this government we will be able to create it in every state. These institutions can then be replicated in terms of creating theses institutions of excellence.
17. The other loud and clear message that I get from the investing community is that investors have a choice, they have a choice of investing in India, they have a choice of investing elsewhere. They are the choosers. My regime has to be competitive with other destinations. And also time is of the essence in that decision-making. And in order to make the Government regime competitive, what is it that the investor expects. The investor expects a total amount of transparency in the country he's investing in. Corruption adds to costs. Corruption adds to instability of the investment. Though who invested through a discretionary process either in coal mines or in spectrum in the last Government had to pay a heavy price for it and therefore it disillusions the larger body of investors. Of course they expect a stable regime. They don't like laws or taxation laws being altered retrospectively. They expect rates of taxation to be globally competitive and therefore one of the key decisions I took in the very first year of the Government and the Prime Minister was gracious enough to fully support these decisions, that this Government will not indulge in any retrospective legislation with regard to taxation matters.
18. In this year's budget I announced, over the next four years with an annually reduction every year, the rate of corporate tax in India will come down to 25% which was in India otherwise unthinkable. Because if I don't make it competitive then people will find China, Indonesia, Malaysia, other countries in the region far more competitive in their taxation policy then yes. And the third thing which is extremely important is that the time taken between an investor deciding to invest in India and the actual launch of his project has to be hugely shortened. this gap can't be years all together. Investors are also very wise people, they are also very restless people. So if this is to be indefinitely delayed then we are no longer an attractive destination and therefore the clearances if necessary, accessibility to land if necessary, the clearance by environmental authorities if necessary, we can't have a regime where companies or projects are black listed for something in the past. Environmental clearances are held up for years. The Prime Minister has set in a system in place where the clearances are being granted expeditiously.
19. With the Finance Ministry we have the automatic approvals, we had 350 FIPB applications last year, almost one investment application a day. About three hundred of them had been allowed, and people had their approvals weeks after they had applied and the other 50 are only in the pipeline inviting comments as far as others are concerned. A very difficult challenge for us in Indian democracy and people felt that the experience of Indian bureaucracy was that its slow moving... and Governments have not really gone into the depth of analyzing the reasons. Bureaucracy and civil service in India was trained to be defensive. It was trained to be cautious. it wasn't trained to be quick in decision making and part of it was attributable to some of the obsolete mechanisms we have in place and a lot of the obsolete mechanisms we had in place was a pre-liberalization law which was enacted in 1988, the Prevention of Corruption Act. It sought not merely to penalize corruption by a public servant it could even bring in a decision if it was an erroneous decision, Even if the decision was an error which was committed bonafide with all honesty in the obsolete language of that provision could have been brought in and therefore with a regime of this kind the Indian civil service was all trained to perpetually on the defense of itself. Now this had to be changed. We interacted with people and in the last session of Parliament and we've completely amended that document and brought it almost at par with the British bribery Law, where it is corruption that's punishable, a commercial decision by a civil servant or Government need not necessarily be a corrupt decision. it could be made with a reasonable mindset and therefore several bureaucrats in decisions relating to privatizations. always found it difficult decisions to take and therefore that regime is now being completely altered. This policy will enable decision making in India to become faster.
20. The other important message that we got out of what happened in the last ten years is that a rule of law and a discretionary society can't co-exist so the Government took a conscious decision to eliminate all forms of discretions. The number of people visiting me in the Ministry of Finance among industry has gone down. There's nothing I can do to help them. I can help them in terms of policy discussions but I can't help them in terms of any individual favors. Therefore in matters of natural resources and matters of public contracts I'm now preparing a draft which relates to public procurement law then any form of public procurement etc has to be done by a non-discretionary method. The Government don't have discretions to the whole country. I think this is extremely important for us.
21. So far even though we have started liberalizing in 1991, we've been without an effective bankruptcy law and therefore we've put the mechanisms in order and by July/August this year I expect the report from the committee that I have appointed for the purpose and within this financial year we'll probably try and take the bankruptcy law itself for approval.
22. There are many suggestions which investors here have made to me. I've already referred to the retrospective tax problem, because we've completely distanced the present Government from that power. There have been problems in relation to transfer pricing. Some erroneous views were taken by the assessing officers, high court society or otherwise, we've put those issues to sleep completely. Of course Mr. "Rethi" has been in the forefront over the last three days complaining about the Mauritius route. So if you want to go San Francisco to Delhi they tax, if you come from Mauritius route they don't tax. There are several reasons why people who adopted this regime must have thought of it, but I'm sure, I've absorbed the message that you've at least on more than one occasion , indicating that the route from San Francisco to Delhi's is straightforward is the more favorable route and therefore it's an issue worth reflecting on.
23. How do I today see the Indian economy in its present shape? Well I think last four/five years, we did suffer. Just as the new Chinese normal is no longer 9%/10%, the new Chinese normal is 7%, the IMF believes it may be a little less than that. The Indian normal certainly was not 5% that we got pushed to. Last year we grew by 7.3%, which is an improvement. But I do believe that's not the Indian normal anymore and I can tell you neither in the Government nor in the Financial Ministry or amongst my friends in the industry. 7.3 % is not a figure which we celebrate. There was at least a sense of relief that the curve has started moving up once again but that was about all. And now the main challenge before us is how do we move back into the 8-10%. We intend to end this year about 8% and that's the time where the takeoff will come. Basic parameters are now coming under control, in terms of inflation we have come down from 11 and a half percent to less than 5%. The good news is that we are so far having a terrific monsoon and therefore, even with modest monsoons, our agriculture doesn't come down, we have a lot of surplus but a good monsoon is always a boom for us because not only will the agriculture and production go up but it also adds to the rural purchasing power. So far the rural purchasing power itself because of last year's weather conditions is not very strong. So even though the urban purchasing power was strong so the four wheel auto sector was going up, the buses and commercial trucks went up, the tractors and the two wheelers weren't going up indicating that in the rural area still there was a possibility of payback. But I think that the monsoon is doing well is a good sign. That itself has in more than one way an ability to contribute to the economy itself.
24. The manufacturing sector which had flattened out to almost zero for about a year or two last year has showed some revival with 7% growth. This year the indirect tax revenues in the month of April and May, where the data has come, have been quite encouraging. And therefore there is significant improvement in indirect tax which is a direct reflection of how the manufacturing sector is doing. And our concentration by this additional expenditure on infrastructure is to substantially move the rates as far as the growth rate is in the manufacturing center. So hopefully if we can up the manufacturing sector in this year and the coming years the agriculture does better, then there are certain areas, investment in infrastructure, investment in agriculture, now wherever we've invested in agriculture, the states have invested in agriculture, the states have done well. I've been giving the example of Madhya Pradesh, which created the river grid and in the last three years its gone up by 18%, 20%, and 22% in agriculture and that has a spiral effect on the whole economy so from a sick state it's become a frontline state. It's had a growth consistently over the last decade of about 10% which was a while considered to be a sick state and today it has emerged out of that situation. So investment into irrigation produces instant results. That's an important message for the Indian Government. So with investment in agriculture, irrigation, investment in rural agriculture, in infrastructure, I think is going to help us in improving the state.
25. The challenging areas had been three, the public sector banks were left in a reasonable dire situation by the last term. There were large NPAs of about 6% and stress assets another 6-7% and the banks were struggling to emerge out of this situation. Hopefully a downward trend has started in the banks but I'm still keeping my fingers crossed that with the recapitalization, we are in the process of professionalizing their management, and I think the important area besides recapitalization is also growth improving and the stalled projects taking off. You can't have an economy where lakhs of crores worth of stalled projects are there. They were stalled for environmental clearances; they were stalled for reasons of land availability. They were stalled because some state Governments or some governmental agency had not given them approvals. And now, for instance one of our flagship programs our national highway program, there were 75 stalled highways, therefore we had to have a policy where from this additional public spending we have increased the expenditure, about 30 of them have taken off already, we've now put an exit clause that those who can't construct the highways must get out and make way for the others. The banks and the ministry are directly linked to some of these stalled highway projects, in fact for railroad modernization, the British didn't construct highways they left a great railroad network in India. And in the last 65-68 years we've only added about 20% to the railway network. And the railroads were becoming the ramshackle railways, the platforms, the trains, the cooling structure. And this year is the first time we've made a huge amount of capital available to the railways, from budgetary resources I've also allowed them to raise tax free bonds.
26. We've also created an India infrastructure Fund then we expect funds and pension funds to become party to this for which railways get some money. Additionally I've got the life insurance corporation which is flushed with funds to make one and a half lakh crores available to the railways for long term financing. So if railways say we will spend part of the money which we've made available to them and the highways gets part of that money I think this whole aspiration of faster growth rates can be reasonably achieved. and if we are able to approve the GST legislation, it alone has the capacity to give further boost to India's GDP growth rate. So hopefully with all these changes due taking place I see with a somewhat more restrained and modest global environment India being able to grow at a much higher pace, which means more jobs, which means more revenue which means more ability to create infrastructure, more ability to support irrigation, more ability to spend on poverty alleviation.
27. What can you gentlemen do in this scenario.? You of course have a great privilege. You are working in a country which is a land of great opportunities and as Indian Americans you certainly have prospered here but there is a great place in your heart and mind as far as India is concerned. I once asked a British Indian as to when India plays cricket for whom does he cheer, and he said he always cheers for India. When England plays he cheers for England. When both of them play with each other what do you do. So he said then I have the privilege of being on the winning side, And therefore you have the privilege of having been in a land of opportunities and having benefitted from these opportunities your country provides to you and of course you desire to see India grow is always there, you are the best ambassadors.
28. I'm not here to persuade people or to preach them to come and invest because investors are very wise people, they look at prospect of investment, and they don't invest only for emotional reasons. They also invest for good business and commercial reasons. India today has a better story to tell and a somewhat modest global growth rate, it stands out as a faster growing economy. In fact agencies like the IMF have been more bullish about us than we ourselves have been and therefore since we have such a great prospect I don't think we can get better ambassadors than most of you gentlemen and therefore in long term investment in manufacturing in startup projects, both the venture capitalists here I think a great opportunity awaits you.
29. A good point has been made and that is we must have a forum for interaction, I carry that suggestion back home and I will certainly explore the possibility of how this can be done. I think its desirable but I have to work with my colleagues in the Government to make sure how this can be done. All I can say is interacting with all investors, policymakers, and think tanks and educational institutions has been a great experience but when I interact with Indian entrepreneurs here I go back with a much greater sense of satisfaction because of your potential as a role model for those in our country.

Thank you very much!!