India committed to integration with the global economy
-Shri P. Chidambaram,Finance Minister
Following is the text of Keynote address made by the Finance Ministry Shri P. Chidambaram at the India Europe Investment Forum in London on 27th June 2007
“I thank you for the opportunity to address the India-Europe Investment forum. The linkages between Europe and India go back a long way. In recent years – to be more exact, since 1991 – India has embarked on a voyage of self-discovery and, in the process, has reached out to the other countries of the world in order to explore opportunities for trade and investment. Our engagement has produced splendid results. We have strengthened old linkages and established new connections. The time is now ripe to renew and reinforce these linkages and take our partnership to a new and higher level.
Let me begin by congratulating the representatives of the countries of the European Union on the historic treaty that the 27 nations concluded at the Brussels summit three days ago. Your leaders have shown great courage, wisdom and foresight. The European Union is poised to become a stronger economic union and a major driver of global growth.
India’s relations with Europe have expanded over the years to cover many areas of mutual interest, including trade, investment and development cooperation. Let me take trade first: Trade with the European Union has grown impressively over the years. India’s exports to the EU stood at US$23.8 billion in the eleven months from April 2006 to February 2007 and accounted for 21 per cent of our total exports. India’s imports from the EU during the same period stood at US$24 billion and accounted for 15 per cent of our total imports. Among the major commodities exported to the EU were textiles and related products, engineering goods, chemicals and gems and jewellery. The major commodities imported from the EU were pearls, precious and semi-precious stones, non-electrical machinery, electronic goods, iron and steel and chemicals.
Now, let us look at investment: The European Union is India’s largest source of foreign direct investment (FDI). EU has accounted for 25.3 per cent of total FDI inflows between August 1991 and December 2006. The investment has mostly been in the power, telecommunications and transport sectors. However, I should also note that in the list of EU’s preferred FDI destinations India’s rank is an unsatisfactory 18, and India receives only 0.3 per cent of the EU’s world-wide investments. As a country that actively seeks foreign investment, I acknowledge that the onus is upon India, and its political and business leaders, to communicate the ‘India opportunity’ to the rest of the world. My presence here, along with Indian business leaders, is part of a determined effort to convey to you the India growth story and win more support for that story.
I believe that there is a large scope for expanding the flow of FDI from Europe to India. The institutional arrangements for promoting investment flows are already in place. India is a signatory to the Multilateral Investment Guarantee Agreement (MIGA). We have also signed bilateral investment promotion and protection agreements with 19 of the 27 EU countries.
With such intense trade interaction and considerable interest in investment opportunities, there is no reason why FDI flows should not be much higher than present levels between the EU and India. FDI is not simply investing capital or making profits or capturing markets. FDI has the potential to build on the size and scale of operations, to transfer technology and to spread international brand names in the new markets.
I now turn to the India growth story, a story that, I am sure, each one of you has closely followed in the last decade. I am sure that you are also keen to know how the story will develop over the next years and decades.
A resurgent industrial sector and continued dynamism in the services sector have characterized the Indian economy since 2003-04. The economy clocked an annual average growth rate of 8.6 per cent during the last four years. In the financial year that just ended on March 31, 2007, GDP grew by 9.4 per cent. It is now accepted in all quarters that there has been a perceptible shift in the growth trajectory and that such a shift is a very virtuous shift. India today has the proud distinction of being the world’s largest and fastest growing free market democracy.
According to Goldman Sachs, among Brazil, Russia, India and China, India will record the fastest growth over the next 30 to 50 years. We have some natural advantages, the foremost among them being the young and educated work force that will continue to give us a demographic advantage until the year 2040 and perhaps even beyond. Besides, India’s aspiring middle class – that is also growing in size -- is driving demand, production and productivity like never before. We also have a diversified base of natural resources. 15 years of reforms have unleashed the energies of India and accomplished a lot.
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