New York

June 16, 2015

The Hon'ble Kevin Rudd, President, The Asia Society Policy Institute,

Distinguished panelists,

ladies and gentlemen,

            Thank you for inviting me to deliver the keynote address on how India has fared one year after Prime Minister Modi's government came to power.

            The fact that you are organizing this conference --- and other such organizations are hosting similar events --- and the fact that the U.S. and other foreign media are zealously analyzing the first anniversary of India's current government reflects what I see as tremendous interest abroad, even impatience perhaps, in seeing India succeed under Prime Minister Modi. A dynamic and visionary leader with unprecedented mass appeal, a government enjoying a clear parliamentary mandate after almost three decades of coalition politics and an economy at the cusp of a new wave of reforms have generated new optimism and anticipation, whose reverberations are felt far beyond the boundaries of India. Indeed, it has been a phase of optimism and anticipation all along since last year's elections.

            These very high expectations underline the interest in assessing the achievements of the government of India in the last one year. I look forward to hearing how the distinguished panelists in this conference view the government's success. The novel and ambitious programmes launched by the government in the very first year are an early indication of the purposive manner in which it is pursuing its reform and development agenda. Some of these entail substantive legislative changes, Constitutional amendments, and political consensus going beyond New Delhi --- something that should not be too unfamiliar to people in this country. However, sound beginnings have been made.

            I would argue that we are at a qualitatively different phase in India's domestic transformation, in India's foreign policy approaches and in India's engagement with the U.S. than we were a year ago.

            More than anything else, the past year has demonstrated that good economics can also be good politics in India. The government has adopted the motto of 'minimum government, maximum governance' to enhance work efficiency and accountability and to deliver good governance and timely service. Policy-induced rent-seeking opportunities have been cut, as you can see in the clean and transparent auction of coal and spectrum. The government has employed e-governance to minimize the potential for red tape and arbitrariness, whether by creating an integrated online platform for submission of applications and clearances, or through a unified labor portal. Similarly, online platform has been created for citizen engagement towards good governance. The government, which has set up a new SIT, passed a stringent law and enhanced the international outreach against black money can claim credit for absence of any corruption scandal in the last one year. This has helped bring down the transaction cost of doing business in India. Prime Minister's vision of making India a global manufacturing hub, with state of the art infrastructure, respect for IPR, a friendly bureaucratic regime and a skilled workforce has created opportunities for businesses.

            The broad direction of economic reforms has been set. Most importantly, interests of state and central governments have been brought to alignment in a spirit of what our Prime Minister calls 'competitive cooperative federalism', which, in the long term, will prove critical to political sustenance and durability of the difficult economic reforms. The government has adopted the recommendations of the latest Finance Commission to enhance the share of state government revenue and has created the Niti Aayog, which gives greater representation to the states. At the institutional level at the centre, the government has aimed to create greater synergy among the different departments, which were earlier often working at cross-purposes. Merger of different ministries in energy and infrastructure sectors has allowed holistic consideration. At the same time, a new Ministry has been created to cater to the much-required field of skill and entrepreneurship development. Climate change has been added to the nomenclature of India's Environment Ministry reflecting long-term thinking.

            There have been several sector-specific reforms in the last year. Foreign Direct Investment limits have been raised in insurance and defense sectors and 100% FDI is now allowed in specific sectors of railway infrastructure. The government has demonstrated political and managerial savvy by implementing deregulation of diesel, petrol and cooking gas prices without entailing hardship for the consumers. A new foreign trade policy has been adopted to enable India enhance her profile as a trading nation. To cater for urgently required land acquisition for major infrastructure projects, the government has promulgated an ordinance to amend the Land Acquisition, Rehabilitation and Re-Settlement Act. In order to track stalled investment projects and remove bottlenecks, a high-powered Project Monitoring Group has been set up in the Cabinet Secretariat for all large-scale projects, including those in the private sector. The political process to build consensus for passage of the Goods and Services Tax Bill in the Upper House is continuing. All these measures will greatly facilitate investment.

            In the last one year, improvement in the pace of decision-making and introduction of a variety of new ideas and initiatives have changed the perception of policy slowdown that had dented the image of the India story in preceding few years. A number of new measures have been taken to promote financial inclusion, digitization, technological advancement and skill development, even as the government has prioritized social issues like sanitation and gender. The government is building toilets in schools in remote villages while setting up new world-standard IITs, IIMs and AIIMs in each of India's states. It is initiating a people-driven Clean India Mission, rejuvenating the River Ganga and setting up Smart Cities that will change the face of India. It is providing new vaccines to our children and has made survival and education of the girl child a priority. It has taken steps to universalize the banking sector and deliver cash subsidies directly to people's banks.

            India's macroeconomic variables have improved considerably in the past year.  India's GDP grew by 7.4% in the fiscal year 2014-15. The IMF has forecast recently that Indian economy will emerge as the fastest growing emerging economy. At the same time, inflation has been brought under control with wholesale price index recording its lowest level in nine years in March 2015 and moving in the negative horizon. The government has more than achieved its fiscal deficit target, imparting a boost to fiscal consolidation and macroeconomic stability. The external sector balance has also improved in India's favour, shrinking to 1.3% of GDP. Between April 2014 and February 2015, FDI into India jumped 30% to US$ 41.22 billion. These are some of the objective criteria on which we can measure the sentiments about India's domestic transformation that the government ushered in.

            Next, let me come to India's external engagement. In the last one year, foreign policy has seen emphasis as a dynamic tool for the government's quest to accelerate India's transformation and leverage India's strengths to promote development in our region, under the motto of 'diplomacy for development'. India has engaged the world as a more confident and outgoing nation. Between Prime Minister, External Affairs Minister and Minister of State for External Affairs, the government engaged more than 100 countries in high-level visits and dialogues in its first year. It has been a year of omnidirectional diplomacy, covering reciprocal and intense exchanges with our immediate neighbours, bold initiatives with our maritime neighbours, robust partnership with major countries, dialogue with the developing world and high-level engagement with many countries and regions where India was conspicuous by its absence for many years, including PM's bilateral meetings with all participating heads of South American countries on the sidelines of the BRICS Summit and with Pacific Island nations in Fiji last year.

            Enhanced engagement with neighbours in South Asia and in the Indian Ocean Region has been a hallmark of the government's diplomacy. Prime Minister Modi began his first day in government by interacting with leaders from our SAARC neighbours and Mauritius, whom he invited to his swearing-in in an unprecedented move, reflecting clearly that cooperative development and seamless connectivity with the neighbourhood, spurred by trade, investment, assistance, functional cooperation and people-to-people contacts, will be a priority for the government. His first two visits abroad were to our neighbouring countries --- Bhutan and Nepal --- and he has now visited most of India's neighbours, with some of these bilateral visits coming after gaps of over two decades. With Bangladesh, there was decisive progress in implementation of the Land Boundary Agreement.

            India has demonstrated its willingness to be an effective and credible partner of the world, using all its abilities. PM has had engagement with leaders of all P5 countries, Germany, Japan, ROK, Australia, Vietnam, Brazil and other major powers. We have set ambitious targets, particularly on trade and economic areas. Relations with Japan were upgraded to 'special strategic and global partnership', built on India-Japan investment promotion and unfolding opportunities for strategic cooperation. His bilateral visit to Australia was the first by an Indian PM after 28 years, with civil nuclear cooperation, business, mining and skill as focus areas. Government has sought deeper economic ties and robust and candid political dialogue with China. With Russia, we have aimed for higher trade and investment, co-production and technology transfer in defence. In the multilateral arena, India has engaged constructively to pave the way for WTO's Trade Facilitation Agreement. On phase-down of hydroflurocarbon, India in April this year became the first developing country to put forward a proposal for amendment of the Montreal Protocol. India's clean energy and sustainable development goals have created the basis for a comprehensive approach to tackling the global challenges of climate change. India's rapid deployment for evacuation in Yemen and relief effort in Nepal in recent months have demonstrated the willingness and capacity to be an effective partner.

            The large Indian diaspora and overseas Indians have been engaged at the highest level with intensity and purpose, in a reflection of the government's recognition of their value as stakeholders in and potential contributor to India's development. PM's visit to Mauritius and Seychelles reflected a determination to seek a future for Indian Ocean that lives up to the name of SAGAR- Security and Growth for All in the Region.

            The Government has worked to leverage India's inherent soft power advantage in interacting with the world, going beyond the traditional actors of diplomacy. UN resolution on International Day of Yoga, promotion of traditional Indian medicine, focus on spiritual heritage and celebration of Indian popular culture in foreign destinations has given an additional flavor and impact to India's diplomacy. PM has also engaged in public diplomacy to create awareness of India's foreign policy at home and abroad --- be it "Mann Ki Baat" programme with President Obama, or spontaneous interaction with the public, in Japan, Nepal, China and many other places. 

            What do India's transformative goals at home and creative diplomacy abroad mean for our relations with the United States? This is the third aspect I want to address while reflecting on the first year of the government.

            In the past year, our relation with the U.S. has been transformed. The U.S. was quick to offer to partner with India in realizing the goals that our new Government set for India's transformation, and as a result, the narrative in our relations has begun to reflect newfound energy and optimism. The excellent personal friendship enjoyed by our two leaders has provided a solid political foundation for our overall relationship. President Obama, who described our relationship as the 'defining partnership of the 21st Century', became the first U.S. President to visit India twice in his tenure earlier this year, when he attended India's Republic Day as the first U.S. Chief Guest. Prime Minister Modi has characterized our relationship as 'natural alliance'. Prime Minister's visit to the U.S. last September allowed high-level engagement with the many stakeholders of our relations in this country, including the Administration, the Congress, business, scholars and the public. Prime Minister further expanded the canvas of our interaction with the U.S. by giving full play to the role of the enterprising and high-achieving Indian-American community.

            In two summits with the U.S. in four months, the Government addressed lingering differences with the U.S. on nuclear liability, injected new energy into defense and economic cooperation, and explored pragmatic ways forward on IPR issues and climate change. Bold new initiatives were taken --- be it the first-ever regionally focussed Vision Statement between our countries on Asia-Pacific and the Indian Ocean Region, or cooperation that we are now exploring for the development of aircraft carrier or jet engine technology in India. A decision to set up a hotline between our leaders and their two National Security Advisors indicates the nature of high-level consultations that the two countries are poised to have.

            The two Summits of September 2014 and January 2015 created new milestones, new expectations and new excitement. In first Vision Statement between our two countries, in 2014, we adopted the motto of "Chalein Saath Saath: Forward Together We Go" for our relationship, and agreed 'to work together not just for the benefit of our two nations, but for the benefit of the world'. This is evident in the challenges that we are taking up --- development and deployment of clean energy through joint research, climate resilience partnership, conservation of biodiversity, high energy physics, synthetic aperture radar, space situational awareness, fight against Ebola and development of affordable vaccine, agricultural productivity, women's empowerment and disaster preparedness in third countries. In the summit of January 2015, India and the U.S. proclaimed a higher level of trust and coordination in a historic Delhi Declaration of Friendship, which commits us to higher level of strategic partnership on the basis of deeper trust and understanding. The U.S. also extended support to India's membership of the APEC.

            Sound progress has been made to implement the vision of our leaders. We now boast fifty dialogues across a range of our government agencies, covering regional and global strategies as well as bilateral agenda of cooperation. We have elevated our Strategic Dialogue to Strategic and Commercial Dialogue at 2+2 Ministerial level. All the policy-level pending issues concerning India-U.S. civil nuclear cooperation have been resolved, including a common understanding about the compatibility of India's nuclear liability legislation with the international regime and conclusion of the Administrative Arrangements. We renewed the 2005 Defence Framework Agreement during Secretary Carter's visit earlier this month, laying the basis for new and more intense cooperation on a broad range of issues in the next decade. Defence Technology and Trade Initiative came into existence last year and, reflecting its intensity, has already met three times. The four pathfinder projects and the two long-term initiatives under DTTI are under fast track of implementation. As regards economic and commercial engagement, we have launched an Investment Initiative and an Infrastructure Collaborative Platform to harness our needs and capabilities and a dialogue on IPR issues to resolve differences. We are engaging on a Bilateral Investment Treaty and an agreement on social security. Our cooperation in science, education, health and functional areas has received a boost in the last year, with initiatives ranging from the first-ever India-U.S. Technology Summit, new initiatives in community college and a new IIT in Gandhinagar, collaboration in the new cancer research institute in India and a new Vaccine Action Programme. Visa on Arrival facility for U.S. nationals will encourage further people-to-people exchanges. These are only some of the many new milestones reached in the last year.

            In conclusion, I would argue that the last year has been used effectively to lay the foundation for India's rapid transformation and for robust and purposeful diplomacy, which have also led to new terms of India's engagement with the U.S. Of course there is more to come in each of these, and I am confident that each passing year, we will make new progress. As we celebrate one year of India's current government, it is difficult not to see the changes in the way of doing business, and not to see in them cause for optimism.  

http://asiasociety.org/video/indias-ambassador-us-narendra-modis-first-year-prime-minister-complete

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