Upper Crystal Room
Taj Samudra
September 23, 2005

Mr. Deve Rodrigo, Chairman, Ceylon Chamber of Commerce [CCC], Mr. V. Srinivasan, Past President, Confederation of Indian Industry [CII], Dr. P. Ramanujam, Secretary [Tourism], Mr. Mano Selvanathan, Past President, CCC, members of the CII delegation and distinguished invitees,

The 'Made in India' venture would remain incomplete without this conference on the Comprehensive Economic Partnership Agreement [CEPA]. The exhibition showcases the best of industry and is an ideal meeting ground for businessmen to meet, transact business and draw up a roadmap for future business. Alongside the exhibition, this conference, provides an opportunity for a meeting of minds on both sides, of people who have specialized knowledge and experience of their respective professional areas. As I said yesterday during the inauguration that as times move on, new requirements arise and new opportunities spring up. These have to be addressed by policy makers in order to fashion the right enabling environment for further enhancing trade and investment. This can't happen without constructive inputs from business persons and business associations. That is where lies the importance of today's conference. The conference comes at an opportune moment when our economic and commercial relations are being redefined by the ongoing CEPA negotiations.

In my life, I have had the valuable opportunity of observing India from within and without. I often wonder at the transition India has made in the last five decades. I see a beautiful collage of juxtaposed Indian strengths - both ancient and modern. India of the 21st century is known as much for Khajurao and Konark temples as it is for its IITs and IIMs; it is known as much for Rig Vedic hymns as for Indipop chartbusters; as much for inner philosophical introspection as it is for the quest for material prosperity; as much for giving the world the concept of zero as it is for ICT and nano-technology. As I remarked in my inaugural speech yesterday, 'India has arrived'. It is the second most populous country with a billion plus population, a burgeoning middle class of 300 million plus and is galloping towards progress and prosperity, imbued with a positive sense of opportunity, self confidence and ambition. Our Commerce Minister Mr. Kamal Nath, has aptly described India as the fastest growing free market democracy - a description where every word has deep significance .

Ladies and gentlemen, India today has become the fourth largest economy (US$ 3 trillion GDP) in terms of Purchasing Power Parity, after USA, China and Japan. In a recent study, noted global consultants Goldman Sachs predicted India would overtake Britain in 2022 and Japan in 2032 to become the third largest economy in the world, in PPP terms, after China and the United States. The fundamentals of the Indian economy are strong and stable and the growth path is steady. The macro-economic indicators exhibit high growth, healthy foreign exchange reserves (US$ 140 billion), and foreign investment, robust increase in exports, low inflation and interest rates despite the pressure of high oil prices. The unique feature of Indian economy has been a sustained GDP growth of 7-8% with stability. The Indian economy has proven its strength and resilience when there have been crises in other parts of the world including in Asia in recent years. The Indian Rupee has moved from strength to strength against convertible currencies. The stock market has maintained its buoyancy and the Sensex has crossed the 8400 mark. All these reflect the vibrancy and stability of the Indian economy and the confidence of investors both domestic and foreign.

India's economic prowess got a tremendous boost with economic reform process which began in 1991. The reforms helped educated and skilled Indian workforce to engineer a remarkable change in the sectoral composition of GDP. Services now account for almost half of India's GDP. India is witnessing an unprecedented phenomenon of its companies not only going global but also acquiring stakes in leading companies all over the world. Companies such as Tatas, Mahindras, Reliance, Ranbaxy, Nicholas Piramal as well as public sector undertakings such as ONGC have been acquiring stakes in large international companies. Among the major deals, the TATA acquired the steel business of Singapore's NatSteel for $300 million. TATA also aquired a stake in the Korean giant Daewoo and and hotel in Manhattan. The acquisition drive now is not restricted to traditional markets like Britain and the United States. Companies are going to countries as diverse as Australia, Romania, Germany, Angola, the Philippines, South Korea and Bosnia. 'India is the only developing country among the top 10 nations for both attracting foreign investment and making investments globally,' says Michael Charlton, chief executive officer of the British government's inward investment agency Think London. Several Indian companies are now listed at the NASDAQ.

While services and manufacturing sector have been the driving force of Indian economy, agriculture still remains the backbone of Indian economy, employing a major portion of its labour force. Thanks to the green revolution and white revolution, India achieved self-sufficiency in agriculture some decades ago. Today, India has one of the largest food production in the world with an annual production of over 600 million tonnes. India tops world production in milk, tea and sugarcane and is the second largest producer of fruits, vegetables, rice, wheat, tobacco and groundnut. With efforts at WTO to decrease protectionism given to agriculture by the western world, we are hopeful that Indian agricultural trade would expand enormously.

With its tech expertise and riding on a outsourcing boom, India is creating a new world order of the division of labour that is not only propelling the country to long-term prosperity but also helping bridge the East-West divide in labour and capital, says celebrated economist Jeffery D. Sachs. "India is teaching the world a lot about the richness of the international division of labour, and how it changes in response to technological possibilities," Sachs writes in his latest, much applauded book "The End of Poverty". He also notes, "The overwhelming dominance of the West, which lasted half a millennium, is probably passé. We should view these developments not only with awe but with anticipation." Sachs argues that when, for instance, customer care calls of the West are handled thousands of kilometres away in the East, then, quite literally, the two ends of the earth come together.

India is slowly becoming a highly sellable brand. The 'Made in India' tag is gradually gaining acceptance for its quality and price competitiveness. CII too has made the 'Made in India' brand popular through its exhibitions all over the world. The globalizing world is characterized by parts of the supply chain being located at the most efficient places. No wonder, top brands are outsourcing goods and services from India. Indian producers are increasingly becoming quality conscious and conforming to acceptable world standards like the EURO, ISO, HACCP etc.

Ladies and gentlemen, there is overwhelming consensus in India and the rest of the world today that India is on the move. We are an open society, an open polity, a functioning mature democracy respecting all fundamental human freedoms, accepting the rule of law, and at the same time, we are acquiring the attributes of an internationally competitive market economy.

Indian industry looks at Sri Lanka with a lot of interest. A strategic location on Asia's trade routes, extensive liberalization and an extremely conducive socio-political and economic environment have made Sri Lanka one of the fast growing economies in the world. The economic advantages and complementarities offered by the Sri Lankan economy have attracted the attention of Indian industry and investors. Preferential tax rates, constitutional guarantees on investments, exemption from exchange control, 100% repatriation of profits, permission for 100% FDI, make Sri Lanka an investors delight. Sri Lanka provides a springboard to the west through the GSP, South-East Asia through the Bangkok Agreement and the Indian sub continent through the five year old Free Trade Agreement with India and recently implemented FTA with Pakistan. The overall Indian experience of investments in Sri Lanka has been satisfying. One issue that awaits solution is the case of Lanka IOC, which is India's largest single investor in Sri Lanka, and is owed US $ 60 million by the government of Sri Lanka. We are optimistic that this matter will be resolved to the mutual satisfaction of both sides. Both countries value their relationship and have always sorted out such issues through reasoned dialogue, and that is what imbues their interaction with confidence and mutual trust.

India and Sri Lanka have had a sense of their historically ordained closeness and contiguity for many centuries. But it is only in recent years that we have witnessed the growing realization that there should be greater integration and interdependence between the economies of our two countries. The economic integration dimension of SAARC has demonstrated only tardy progress. South Asia, till today remains one of the least economically integrated regions in the world, barring the African continent. It was felt that SAARC efforts need to be supplemented with movement on the bilateral track. With this objective, the India-Sri Lanka Free Trade Agreement was signed in December 1998. The FTA, which was the first FTA for both India and Sri Lanka, came into force in March 2000. The agreement was carefully drafted keeping in mind the economic asymmetries between the two economies. At this forum, I would not like to go into details of the FTA, which most of you are, in any case, aware of. All I would say is that FTA has been a stepping stone for future integration of our two economies. Between our two countries, increasing economic interdependence is regarded more as an opportunity than as a threat. There is, therefore, bipartisan political support for such economic integration. And, let me add that this impulse for interdependence stems from natural, organic causes - we in India and Sri Lanka come from societies that are plural, that are multi-faceted, and which are able to balance diverse identities - and which recognize the value of reaching out to the outside world, because such reaching out adds value and further substance to our lives and our livelihoods, our todays and our tomorrows.

The trebling of bilateral trade in the last five years does not make us complacent. It dictates the growth trajectory which we have to follow. Bilateral trade crossed the billion dollar mark in 2002 and stood at 1.73 billion at the end of 2004. Of this figure, Indian exports amount to US $ 1.35 billion and Sri Lankan exports amount to US $ 382 million. Another graph that emerges is the declining trade gap ratio. The trade balance in favour of India has declined from 15.7 : 1 in 1998 to 3.5 : 1 in 2004, demonstrating that Sri Lankan exports have grown much faster than India's and the result has been a more equitable trade expansion. India today is the largest source of Sri Lankan imports, followed by Singapore, Hong Kong and China. India is also the third largest export destination following US and UK.

While FTA was just the stepping stone and an instrument for us to test our synergies, we are working towards graduating to a Comprehensive Economic Partnership Agreement. The lessons learnt in the five years of FTA are helping us in shaping the CEPA which we intend to conclude by the end of this year. CEPA is expected to sustain and build on the momentum generated by the FTA and take the two economies beyond trade in goods towards greater integration and interdependence. The scope of FTA will be widened to include more items and deepened to improve market access through trade facilitation and removal of non trade barriers. CEPA would also look at trade in services, facilitation measures on bilateral investment and bilateral economic cooperation to complement economic liberalisation.

I am confident that the panel discussions to follow, that on trade in services and measures for enhanced economic cooperation under CEPA would provide an opportunity for brainstorming on these important areas which offer immense opportunities. I would like to once again compliment CII for organizing this conference in conjunction with the 'Made in India' Exhibition.