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Speech by Minister of State of External Affairs on ''Portugal and India - Forging a New Growth Partnership'' at the Horasis India Meeting, Cascais (July 03, 2016)

July 04, 2016

His Excellency Augusto Santos Silva,
the Foreign Minister of Portugal,
Dr. Frank-Jurgen Richter,
the Chairman of Horasis,
Ladies and Gentlemen,

I am delighted and honoured to be a part of the 8th India-Horasis Meeting, which is attracting a wider audience each year and has emerged as a prestigious global economic forum, underscoring the growing interest in India as a business destination. Before I begin, I would like to commend the Horasis Vision Community for its stellar work in providing strategic foresight to public and private entities that aspire to grow into sustainable global organizations. I am equally thankful to the Mayor of this beautiful coastal city of Cascais for the city’s generosity in hosting this event and to the Confederation of Indian Industry, for bringing together the best of Indian industry to showcase the opportunities offered by India under the dynamic leadership of Prime Minister Modi.

I am greatly looking forward to the 'ahead of the curve' discussions that Horasis is famed for and to taking away useful insights and suggestions for the Indian government from the collective wisdom of the leading captains of industry gathered here. This is as timely a moment as any, to discuss ways and means of overcoming the challenges faced by the global business community, enhance corporate performance and long-term growth, and look at the tremendous opportunities that India, the fastest growing major economy in the world today, represents.

Ladies and Gentlemen,

I am particularly happy that this year's edition is being held in Portugal, a country with which India enjoys close and friendly relations. India and Portugal are bound by close ties of shared history, culture and language. With Portugal home to one of the largest Indian diasporas in Europe, our two countries are irrevocably connected by compelling people-to-people ties that have forged a timeless human bridge between our two countries. Anchored in our shared values of democracy, pluralism and individual freedoms; buttressed by enormous goodwill and bipartisan political support on both sides; and buoyed by India's growing engagement with Europe and the E.U, India-Portugal relations are poised to move to the next level.

Our two countries enjoy excellent bilateral ties. We have a long and enviable track record of constructive cooperation in multilateral fora; Portugal has been a steadfast supporter of India's global aspirations, including our demand for permanent membership of the UN Security Council and of multilateral export control regimes. We have robust security cooperation, including extradition of wanted criminals. India continues to showcase its proud traditions of cultural assimilation in its Portugese names, art and architecture; similarly, Portugal hosts one of the largest Yoga confederations in Europe today and is the first European country to partner India in establishing the iconic Nalanda University.

And yet, our bilateral trade and investment relations, while remaining warm, are well below potential. While bilateral trade grew steadily over the past few years, it dipped significantly in 2014 and 2015 to less than 700 million from a high of almost 967 million. While this is perhaps reflective of the global economic situation and the slowing down of global trade including India's overall trade, it demonstrates fairly clearly that our two countries need to do much more to tap into the tremendous economic opportunities and synergies that exist between us.

These figures belie the fact that only a few centuries ago, it was the intrepid Portugese seafarers who braved the long and daunting journey across the oceans and arrived in India in search of trade and commerce. Not only India, Portugal played a pioneering role in world history as it linked continents and markets across the globe in interdependent webs of economic engagement. Today, the remarkable manner in which Portugal has managed to turn around its economy after the 2008 economic crisis and achieve positive growth, underlines Portugal's inherent ability to convert challenges into opportunities. It is now time to turn the challenges perceived by both our businesses into opportunities for 'win win' partnerships between India and Portugal. We look to our Portugese partners to shed inhibitions, rediscover their entrepreneurial spirit and bet on the India story. With the commonalities of culture and language that we share, Indian businesses similarly, need to look at Portugal as a key European trade and investment partner and a cost-competitive entry point and launch pad for their forays into European and Lusophone markets across the world. For instance, I wonder why our enterprising IT industry has not yet looked at leveraging our Portugese-speaking populations in Goa, Daman and Diu to provide low-cost back-office and IT outsourcing services in the Lusophone world! I believe that a growing Indian economy which needs foreign partners and a resurgent Portugal looking to diversify its export markets and investment portfolio, can forge a stepped-up partnership. We must remember that India and Portugal are not just nations with glorious pasts; we are countries with exciting futures.

Speaking of the future, India's growth story presents a world of opportunities. In a world where more than half of the global GDP comes from outside the original industrial powers, India is destined to play a key role. Even after seven years after the financial crisis, the global economy is still struggling to regain momentum, and growth continues to falter in advanced economies. Growth prospects have weakened throughout the world and global growth this year is likely to remain unchanged relative to the disappointing pace of 2015. In this context, the gradual increase in the global weight of emerging economies like India, Indonesia, Bangladesh, the Philippines, Mexico, Colombia, Nigeria, Ethiopia and East Africa is providing much-needed relief for boosting global growth.

Despite the respite provided by emerging economies, 2016 will still be a challenging year. Between a slowing Chinese economy, collapsing commodity prices, global volatility and uncertainty sparked by BREXIT, the beginning of the US Federal Reserve’s rate-hiking cycle, the slow productivity growth in Japan and EU, the steel crisis and the falling oil prices; many emerging-market economies have become quite fragile, notably Russia, Brazil, South Africa, Thailand, and Turkey. Corporations in these economies are saddled with large amounts of short-term, dollar-denominated debt, which become increasingly difficult to service as the dollar strengthens, leading to worries about corporate defaults and bailouts.

In an environment where global economic growth is modest and fraught with uncertainties, the International Monetary Fund (IMF) has described India as "a bright spot". With an economy growing at 7.6%, India is the fastest growing major economy in the world today. The growth rate is especially impressive when one compares it to IMF's global growth forecasts of 3.2% to 3.5% over the next 2 years. There are other statistics that speak for themselves: India is the 13th biggest global trader in goods and services. It is one of the world's most open markets, with almost 50% of its GDP coming from trade in goods and services as compared to only 30% in the United States and 42% in China. India has moved up 16 positions to become the 55th most competitive economy as per the World Economic Forum index. India is also now the 6th largest manufacturer in the world. None of these successes have come easy - in the last two years, our government has resolutely pursued economic reforms, made difficult policy choices and taken several steps to improve governance and make it easier for foreign investors to do business in India.

For instance, medium-term growth prospects of the country have improved as a result of the policy initiatives taken towards unlocking coal and mining activity. Just a few weeks ago, we introduced a second wave of Foreign Direct Investment (FDI) reforms, liberalizing ceilings by allowing 100% FDI in railways, defence, brownfield airports, online retail of goods and services, food products in India and raising the ceiling to upto 74% under automatic route in pharmaceuticals. We have also liberalized local sourcing norms to encourage investments in single-brand retail.

It is said that the proof of the pudding is in the eating. I am happy to inform this august audience that as a result of our reform initiatives, India has been able to attract US$ 55.45 billion in Foreign Direct Investment since our Government took charge two years ago, registering an impressive growth of 43%. We hope that Portugal which currently ranks 56th in terms of cumulative Foreign Direct Investment into India with US$ 36.5 million will see a similar upward trajectory in the days ahead.

As a former Chief of the Indian Army, I would like to especially underline that India represents enormous opportunities to our European partners in the area of defence. India is expected to spend around US$ 130 billion on defence modernization alone in the coming seven years. In addition, we have announced a new Defence Procurement Procedure in March this year that seeks to make India a manufacturing hub for export of ‘Indigenously Designed, Developed and Manufactured' (IDDM) items, to other countries. The fact that the Portugese association of defence industries IDD participated in our flagship defence event AEROINDIA for the first time last year, is a clear sign of growing Portugese interest in collaborating with us in this sector. I am happy that we are looking at exchanging visits by our Defence Ministers soon to advance our ties in this important area.

Our government has also placed a renewed thrust on public investment in infrastructure, to help improve the investment climate. We are planning to spend 32 billion US dollars on building highways, 16 billion dollars on building world-class port infrastructure, 5.5 billion on developing inland waterways and 132 billion dollars on modernizing the rail sector.

A clear-cut road map for lowering corporate tax from 30% to 25% over the next 4 years has also been laid down. Retrospective Minimum Alternative Tax (MAT) affecting foreign funds has been waived and the government is working towards early implementation of the Goods and Services Tax (GST). Two months ago, the government passed the Bankruptcy Law to ensure time-bound settlement of insolvency, enable faster turnaround of businesses and create a database of serial defaulters. We also put in place an updated National Intellectual Property Rights (IPR) Policy to more effectively channelize the flow of innovation into India.

In addition to improving the macroeconomic policy framework, we are taking concrete steps to improve the ease of doing business in India. We are putting in place simplified, transparent and faster processes for clearances including online project approvals and 'single window' interfaces; easier environmental clearance procedures; speedier arbitration processes and cracking down on corruption. I am happy to inform you that our efforts have borne fruit - India has moved up by 12 places in the World Bank's Ease of Doing Business index since the Government took over 2 years ago. According to the World Bank report, it takes 29 days to start a business in India today, unlike the 127 days it used to take in 2004. AT Kearney’s Global Retail Development Index ranks India as the second-easiest developing country to do business in.

In history, every country that has grown, has increased its per capita emissions footprint. We are committed to re-writing that history. At the Paris COP 21 Summit, we committed to derive 40% of our electric power from non fossil fuel sources and reduce our emissions by 33% by 2030 even while growing at a fast pace. What does this mean for businesses? India will be one of the biggest markets for clean energy, especially solar, wind and nuclear energy, many of which are Portugal’s strengths.

Ladies and Gentlemen,

65% of India’s population is under 35 years of age. An impatient India wants rapid socio-economic transformation. To realize this, we have unleashed transformative flagship projects like Make in India, Digital India, Skill India, Start Up India, Clean Ganga, Smart Cities, 24X7 Electricity and Housing for All. These initiatives collectively envision India as a high-functioning economy focused on industry, innovation and entrepreneurship, job creation, infrastructure development, and total digital connectivity. Given the tremendous scope and scale in India, each of these initiatives encompasses a dizzying array of collaborative opportunities for foreign partners. Out of the 140 countries that my government has engaged with at high levels in the last two years, we have forged collaborations with many of them in these priority sectors, ranging across investment, transfer of technology, joint ventures, public-private partnerships, best practices, research and development. Initiatives like ‘Make in India’ are not just slogans but part of a new national movement. To this informed audience, I hardly need to state the obvious: our scale of transformation is vast; therefore, the opportunities we offer are immense.

Given Portugal's acknowledged world class competencies in many of our priority sectors especially infrastructure, renewable energy, construction and tourism, I invite the Portugese government, business and industry to take advantage of these opportunities and partner us in our transformative economic agenda.

Portugal and India share strong complementarities in information technology, pharmaceuticals, automobiles, agro products, fisheries, tourism and a host of other economic sectors. We have already made significant progress in some areas like IT when India's IT major TCS opened one of its sales headquarters in Lisbon in 2005 and when a new telecom joint venture entity Birla Visabeira was announced last year. Today, we have leading Portugese companies like Martifer Solar investing actively in India’s solar sector and Indian companies like Zomato entering Portugese markets. We need to build on these impressive initiatives and work together to realize the full potential for collaboration in these and other sectors.

To do this, I strongly believe that we need to strengthen institutional mechanisms such as the India-Portugal Joint Commission and hold regular Foreign Office Consultations. We also need to have regular exchanges of visits by trade delegations facilitated by our governments and anchored by trade bodies such as the AICEP and AIP, the Portugal-India Chamber of Commerce and the Lisbon Chamber of Commerce along with their Indian counterparts. I am strongly of the view that it is important for business persons to come and see with their own eyes the realities on the ground in each others' countries so that they do business confidently. In order to attract medium sized Portugese companies to invest in India, we could create mechanisms in Portugal on the lines of the Make In India Mittelstand (MIIM) Programme which is successfully underway in Germany to promote investment in the SME sector. There is already an 'Invest India' facilitation desk for European countries being set up in our Ministry of Commerce; I would urge you all to make good use of it.

We have a robust partnership in science, technology and joint research; we need to further deepen and expand it in niche areas of mutual interest. We must also renew and intensify institutional mechanisms such as the Cultural Exchange Program and Educational Exchange Program. From the endless beaches of the Algarve coast to the mighty Himalayas, the potential for tourism in both countries is immense. With India extending the Electronic Tourist Visa facility last year to Portugal, there has been greater tourist traffic between our countries. We need to look at promoting more investment and commercial tie-ups in this sunrise sector of mutual interest.

It is clear to me that India and Portugal are committed to strengthening their historical links to build a strong, contemporary relationship that reflects the vast goodwill that our people have for each other. Our Prime Minister looks forward to working closely with His Excellency Prime Minister Antonio Costa to realize the immense potential that exists for bilateral collaboration across a wide gamut of economic, commercial, cultural and strategic issues. With Prime Minister Costa's family ties to Goa and his keen interest and enthusiasm in energizing relations with India, we hope to receive him on a visit to India soon! We are confident that under his leadership, India-Portugal ties will be taken to the next level.

I trust that this distinguished gathering will offer interesting insights and constructive solutions to the key challenges which exist in the context of our engagement with Portugal as well as the global economy. As a representative of the Government of India, I am here to listen to your concerns, suggestions and advice. I promise to carefully report them back so that they can be addressed and factored into our ambitious plans for India’s growth, advancement of India-Portugal relations and to strengthening India-Europe engagement.

Ladies and gentlemen,

I would like to conclude by underscoring that India is not only the world’s fastest growing major economy today but also the world's largest democracy. We are proud of our unique achievement in fast-tracking economic growth and development without sacrificing our democratic values, individual freedoms, pluralism or rule of law. Indeed, we firmly believe that they are the foundation on which our growth story will continue to be built. With your support I assure you that India is ready to play its part - as an anchor of economic stability; an engine of growth; and, as a force for peace, stability and humanity in the world.

Thank you.


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