India Press Releases

Expanding the U.S.-India Commercial Relationship

By Frank Lavin

(This signed article appeared in the November 28, 2006 edition of The Economic Times)

For Americans looking at the prosperity now taking root in India, it is a paradox that a country so rich in history, culture and talent could have been under performing economically for so long, and is only now rising to its rightful leadership role in the world economic system. Indeed, India is at a transformational time in its relationship with the world, and is now making itself more competitive and prosperous. No one knows this better than Prime Minister Singh, who has been steering the economy towards increased liberalization and unleashing the pent-up potential for growth. These efforts are already producing results, with sustained economic growth of about 8 percent.

For Americans looking at the prosperity now taking root in India, it is a paradox that a country so rich in history, culture and talent could have been under performing economically for so long, and is only now rising to its rightful leadership role in the world economic system. Indeed, India is at a transformational time in its relationship with the world, and is now making itself more competitive and prosperous. No one knows this better than Prime Minister Singh, who has been steering the economy towards increased liberalization and unleashing the pent-up potential for growth. These efforts are already producing results, with sustained economic growth of about 8 percent.

This good news is not only beneficial for India, but also for India’s partners, including the United States. When President Bush and Prime Minister Singh met in March, a new era in U.S.-India relations began. In economics, security and political affairs, they agreed to invigorate our strategic partnership at a time when there is so much at stake for both our countries. India and America are natural partners, with compatible interests and a shared dedication to multi-culturalism, democracy and the rule of law.

As a part of this partnership, I am leading the largest business mission ever assembled to any country by the U.S. government. In a spirit of cooperation, friendship, and mutual benefit, more than 200 American business leaders are accompanying me on this mission which will be launched at the India Business Summit in Mumbai on November 29. To the Indian leaders who have asked us to bring American companies to India, this mission is our reply. I am bringing the best of American business to meet with the best of Indian business.

Consider the industries that will be represented on this mission: medical devices, finance, energy, retail and polymer science, to name a few. Each of these industries represents an opportunity to collaborate and to participate in developing India’s economy, thereby enhancing our commercial relationship.

The United States is India’s largest trading partner, and our bilateral trade is booming with more than 20 percent growth so far this year. Increased business between our nations will expand and extend our friendship and lead to increased prosperity and jobs in both of our countries.

The last few years have seen an emergence of an improved business and investment environment in India, and this has played a key role in growing India’s economy. India has made important moves to begin opening its economy, including lowering tariffs, reducing non-tariff barriers, opening sectors like telecommunications to foreign investment an and taking the initial steps to increase the protection of intellectual property. Also, last year we signed an Open Skies Agreement, which has increased competition and lowered prices on international flights to and from India.

There is, however, much more that can – and should - be done. Among the steps that can be taken, I suggest three that will clearly improve India’s competitiveness and quickly benefit Indian farmers, consumers and businesses.

First, India needs more investment to stimulate growth. By end of last year, India had received $45 billion in foreign direct investment (FDI) in total, with $8 billion of that from the United States. Compare that to one of your neighbors, tiny Singapore, which at the same time had received more than $186 billion in total and $48 billion from the United States. An important step that India can take to attract more investment is eliminating foreign equity caps and prohibitions on investments, particularly in the financial services, banking and insurance sectors. This will allow capital to flow into the areas where it is needed the most, including the rural sector. Efficient, competitive and open markets will invariably lower borrowing and premium costs for Indians and increase the quality and variety of services that Indian consumers deserve.

A second area for improvement is in retailing. Recently, the Indian government has begun to open the retail sector by allowing foreign majority ownership in single brand retail outlets. Significantly greater benefits will come through allowing foreign multi-brand retailers to compete for Indian consumers, who will enjoy greater convenience, lower prices and a wider selection of products with the inclusion of international retailers in the mix. Additionally, more competition will be a catalyst for increased efficiency across the entire supply chain. For example, an estimated 30 percent of India’s agricultural output spoils before it gets to market. This would change with the creation of more efficient supply chains and work to quickly extend prosperity to all people, both in the cities and the rural areas.

Third, India is becoming both a user and a creator of intellectual property, especially in key sectors such as IT and biotechnology. As much as consumers have the right to benefit from new products and ideas, there is an obligation to the inventors as well. The creation, adoption and enforcement of clearly defined laws that protect the rights of patent and copyright holders will increase the number of products available in India. It will also encourage the Indian spirit of innovation and entrepreneurship by protecting investments in research and in the brands that companies use to distinguish their products.

In each of these three areas America provides equal protection to Indians doing business in the United States. Each of these reforms will enhance our relationship, and will contribute to the improvement of the Indian economy.

My hope and desire is that every Indian business will have the opportunity to compete in the American market, and that every American business will be able to offer their products to Indian consumers.

This trade mission brings the largest and the oldest democracies on earth closer together. Technology, trade liberalization, and increased awareness of global opportunities have made it easier to collaborate and do business than ever before. I hope that we can take full advantage of that. In these exciting times, our partnership makes the potential benefits to both of our great countries truly without limit.

Franklin L. Lavin
Under Secretary of Commerce for International Trade
United States Department of Commerce

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