 You had an enjoyable break, lots of networking. I think networking is almost as important as some of the business and econ discussions that happen at the front of the room. So we tried to build that in. I think every conference planner plans to build in lots of networking time. But then speeches run long, too many people are on stage, and it doesn't happen. So far I think we've managed to hold to it. So glad you're all able to be here for this. So the morning session we got to hear from the organizers for the program and Dr. Ramesh Wadwani and the Wadwani Foundation, our terrific friends TN-9 and Tarun Das, Kiran Pasrecha from the Ananta Aspen Center, Dr. John Hammery here at the Center for Strategic and International Studies. And so now we'll transition a bit and I think for the morning session to hear also some of the things that the Indian government has been doing, both to open up and to get the economy rolling again. And we couldn't have asked for, I think, somebody better to set the table on that than the Finance Secretary, Mr. Rajiv Marishi. You probably have heard of Mr. Marishi. He has built up quite a reputation, I think, both his work at the State level from Rajasthan and the work that he did under Chief Minister Vasundar Rajay, but also immediately after moving to Delhi and taking over as Finance Secretary in October 2014. We've seen a lot of work coming out of the Ministry of Finance between the budget, between getting critical reforms like the insurance bill passed through Parliament. It has been a time of much activity. So hopefully, even though you're on travel, jet lagged, and speaking at many different events, you look at this as a bit of a refrieve from all the tremendous things you've been doing while in Delhi. So Secretary Marishi, I invite you up to the lectern here, sir, and thank you for joining us. Thank you, Rick, for your kind words. And thank you, CSIS, for having me here today and giving me this opportunity. It's never easy to fit, you know, fitting to another person's shoes. And I believe I'm filling in for NK Singh, who's not here. And NK Singh's shoes are actually quite large. So I don't know whether I can fit them, but I'll try to do some justice to them. The advantage, of course, I have of filling in is that I can choose to ignore the topic given to me. And so I don't have to pretend I know things about the topic. And so I've decided to actually talk today to you about an area which not very many people understand very well in India. So obviously, I'm quite sure that very little understanding of it is available in the United States. But as people who want to engage with India or who are engaging with India, I think knowing this part of India is also important. So I'll speak to you today about fiscal federalism and fiscal relations between the center and the state in India and how it impinges on prospective investors who have to work in India or who are working in India. As I said, this is an area that not too many people understand in India also. So I hope if I bore you, please raise your hands. I'll stop. Well, like most countries, India also has a three-tier structure, like most many countries. So there's a central government called the Union Government. There are state governments, and there's a third tier of the local governments. Today, I'm going to concentrate and tell you about the first two tiers. There's a central government and the state governments, and how their relationship is structured and how it is now evolving in very meaningful and interesting ways. And this evolution is taking place, has sort of picked up speed in the last couple of years, last two, three years, and is showing up in very different sort of actions and recommendations and developments. So the work is divided between the state and the center by the constitution. The tasks given or the powers that the central government can exercise are in what is known as the central list, and what the states can do is known as the state list, including the areas where they can use tax. So there's some tax station powers which are devolved to the states, notably syntax like tax on liquor, and also tax on sale of goods. It's important to note this because I'm going to talk about GST too. So tax on sale of goods is also with the states. There is also a third list, which is known as the concurrent list, which is unique to India, where both the state and the center have concurrent powers. But the constitution provides that should there be legislation, and both the state and the state can legislate, but the constitution provides that should there be legislation by the center, then the center's law will prevail. And it's important to note this also because I will refer to the states yearning for change by referring to the example from Rajasthan of labor reforms, which are in from the concurrent list. And they impinge heavily, as I said, on investment and investors in India. The revenues collected by the central government are the major revenues of the of the country. They include custom duties, exercise duties, service tax. So they are major, the major revenues collected by the center, and therefore the constitution also provides in article 280 that the revenues collected by the central government would be divided amongst the, between the center and the states, and then amongst the states. So there's article 280 of the Constitution of India provides for setting up a finance commission every five years, and recommend the division of fiscal resources between the center and the states, and from the share of the states amongst the states. We've had recently a report of the 14th Finance Commission, which has been implemented in great part. And this is also to be noted because I will refer to this also in a short while on how it has affected the balance of power between the center and the states. To the credit of all the governments in India from 1950 onwards, the recommendations of the Finance Commission, though they are recommendations and therefore technically rejectable or acceptable, but it's the credit of all the governments in India, central governments in India, that from the first of the 14th Finance Commission no major recommendation of the Finance Commission, especially recommendation regarding devolution of taxes has ever been tinkered with. That is a maturity shown by the central government that it has stated the recommendations of the Finance Commission as an award. Now, I will talk now, therefore, having given you this background of the scheme of things, I will talk to you about now three developments that have taken place that are evolving now and which impact the politics of the country and impact economic activity in the country. The one, of course, is the often talked about introduction of GST, the general sales tax. The question now because of the constitutional scheme of things, you have to pay a tax to the central government, you have to pay taxes to the center, you have to pay taxes on, for example, imports on service tax and also tax on manufacturing known as exercise duty and in the state you have to pay tax on sale of goods that tended to have a cascading effect on the taxation on the tax incidence on the goods and make it more expensive. And it also meant a harrowing piece of paperwork involved in not only meeting requirements of two tax authorities, one in the center of the state but actually of 28 tax authorities because each tax authority in the state had its own sort of rules and laws to deal with tax on sale of goods. So the GST is an idea which is to amalgamate the two taxes. It is being done by building consensus. There is no constitutional provision where the central government can impose this on the states and therefore it has to be done by consensus and it has been under discussion now in various ways for nearly a decade, less than a decade but almost a decade and again it's an ode to the maturity of Indian politicians that they have an agreement in place and as a consequence Finance Minister Jaitley has introduced in the parliament this year an amendment to the constitution to allow for the amalgamation of these taxes. What in short what is happening is that the states have now agreed basically to give up their absolute power on imposition of tax on sales of goods which is a very important development from the both from a political point of view and an economic point of view. So GST is likely to be introduced in India hopefully in the next one year. It will take a year because the constitution amendment requires both houses to pass it and then ratification by half the states. It will take time and then there has to be a law for GST thereafter enacted under the new constitutional provision. It will take time but we hope to have it in place as announced by Finance Minister Jaitley by the 1st of April 2016. This development should make doing business in India a little more attractive and simpler and contribute to the ease of doing business in India. It will also create difficulties in getting changes in incidence of taxation because instead of going to a state government and changing changing a tax rate or central tax rate by going to government of India as Finance Minister, now it will have to go through a process of consultation with all the states. So it will also make therefore tax regime in India most predictable because it won't be so easy to change it. The second development that is taking place is the assertion of the states to not abide by the laws that the central government enacted and has not changed for years. The example I need to take that I need to mention here is the must talked about in India reforms in labour laws which Ishaan carried out last year. So the reforms that Ishaan has carried out in four laws, labour laws of India, four different acts are actually in contradiction to the central law and the only way that law could have got the assent of the president was for the central government to agree for a special car boat for Ishaan. Central has that power to allow for a car boat if a state wants it and it is again a sign of the times an indication of shifting power equations in India between the central and the states that the government of India and those the amendments made by the Ishaan. So Ishaan now has is perhaps the only state which now has much eased labour laws compared to the rest of the country. So this is the second point I wish to make that not only are the states asserting their right to have more say in how their states are run but equally significantly the central government is willing to, is there something? A central government is willing to allow states to assert this. This also should in the long run make, in the medium run make doing business in India in some states much easier. Suddenly labour law compliance in Ishaan today is lot easier than it is anywhere else in the country. The third significant development that I need to talk about that I want to talk about is the report of the 14th finance commission which actually makes a tectonic shift in the resources between the center and the states. So far most finance commissions up to the 13 finance commissions had recommended that 30 percent between 29 and 32 percent that is a range of the net collections of the of the center be transferred to the states and then therefore there was of course distribution amongst the state of that money by a formula. The 13 finance commission, the last finance commission whose period ended on 31st March 2015 had recommended transfer of 32 percent of the sources to the states. The 14 finance commission has recommended the transfer of 42 percent of the revenues to the states. That's a huge jump and suddenly the states have much more untied money. There is no obviously the money is the same pool but who has control over spending it that paradigm has changed. So that paradigm has changed and states will therefore have more say in spending the resources. If we take the all the tax resources of the country as a whole both the central taxes and the state taxes and combine them and see because states get to retain their own taxes they don't share those and only the central pool is shared. So if you combine the two tax sources and see how much of the taxation resources now retained by the states it's about 62 percent. So two-thirds of the fiscal resources of the country are going to be with the states. Now this development has to be seen also as coincidental to and in the context of the fourth development which is actually a kind of averse of this development of the finance commission which is the winding up of what we used to know as the planning commission. Now I will not go into that because that's a story of socialism and command and control economy which I hope we have given up as a bad dream forever but that but the recommendations of the 14 finance commission are actually a very important step in not only empowering the states but also finally burning the ghost of their command and control economy. So we don't have a planning commission in India anymore and we don't have any said pattern of command or targets to achieve in terms of development etc whatever the planning commission was supposed to do. Now this the three important developments that I talked about the likelihood of there being a GST the likelihood of more and more states making laws which are not consistent with central laws and therefore perhaps not as more abundant as them. The central government has more difficulty in changing laws because it needs consensus building amongst the states but the state has to only decide for itself. So second development of perhaps laws becoming more friendly more welcoming to the investors that perhaps that trend I hope that trend has started with Rajasthan and I hope it continues. I am told that as we stand today here Rajasthan has now finally passed some amendments to the right to execution bill also and they're on their way to government of India for approval. So that is the second important development and the third important development is that the states have a lot more financial resources at their command to spend as they wish. Now what does this mean so I said I link it to investment and investors so what does this mean and imply I have said broadly what GST can mean for investment I've also said that labor labor laws etc are can be eased by the state governments without waiting waiting for the central government's elephant to move and that the financial powers give states more assertiveness. So what does it mean for the investor investor in India if you're going to invest then one thing that we have to realize that we have to deal with two different governments. There is an effort by the government of India in the ministry or department of industrial promotion to try to create a platform idea platform which is actually very well done which will get the state governments and the central government to give as many clearances as possible through that one window but still while entering India you largely deal with the government of India but once you've entered an invested because you to build a factory or you to run a factory or a business or some business you to run within that that business is situated in this in one of the states and then once you are in there then you will deal largely with the state governments. So this we have to reckon with and recognize and these developments that have taken place on the financial economic front are consistent with developments that have taken place in the last 30 years political governments that has taken place in the last 30 years where political power has gradually shifted to the states. So states are going to be meaningful for all investors and I think that is a very positive development for investors in India whether they are domestic or foreign. It's a very positive development because state governments are smaller governments and therefore they are easy to navigate in my opinion they are easy to navigate and easy to understand, easy to approach people who can take decisions as opposed to a certain government where decision making can be very very disparate. So I think it is going to be it's a very good development that is happening the state governments will be able to take more decisions they are capable of taking quicker decisions because they are a smaller government they are capable of being more flexible they are more they can be quicker and faster. Secondly and more importantly state governments actually understand the importance of investment much more than center does for the center the benefit is somewhat intangible in terms of GDP growth foreign exchange reserves etc for the states the outcome is very very tangible the factory comes up people get employed shops come outside the factories trucks number of trucks increases so the benefit of the states can be seen in a much more tangible fashion as a result it is also my conviction that states are much more investor friendly than the center is and therefore it's also my conviction that basically not that center is unfriendly but center is not capable of helping beyond the point it can ease your entry into India but beyond that it's a state government which has to which which you have to survive and state governments do realize the value of investment and i'm sure that many of the friends here who have gone and interacted with the state government especially if they went to states like Gujarat or Maharashtra or Kanataka would have found a response to be extremely positive friendly and quick so this is the major development that i wanted to talk to you about today i hope i haven't bored you and even if i have i can only apologize but i stand here and i'll take a few questions if somebody is interested thank you when you increase the amount that the states are going to get does the center kind of tell them what they can spend it on or can they do anything they want with it no once the that's the see that that is the whole issue that the planning commission used to run things called the centrally sponsored schemes on items which are in the state list there they could direct what the money was spent on and states have been clamoring now for many many years that we don't want to be directed by the center and how we handle our problems so we know what our state's requirements are so for example there was a there was a scheme on roads called the Pradhan Mantri Grameen Sadag Yojana which Rajasthan took huge advantage of but Gujarat couldn't because Gujarat had all the roads in the world already all the roads they wanted so basically this inequity of making centrally sponsored schemes on a one-size-fits-all approach is what the states had been opposing and asking for untied money devolution is untied money so once the money devolves then as a tax devolution under the finance commission then the center has no say on how it is spent no legal say there can be other ways of trying to arm twist the states but there's no legal say I have one other short question you know here in the United States when we do work for the federal government okay and I invoice them they have to pay me in 30 days or they pay interest automatically okay do you have any such plans in India no we don't and there is no law which governs it but naturally that's one of the areas of concern that we are well aware of delayed payments and the corruption that arises as a consequence and therefore you know in the in the current budget Finance Minister Jaitley has announced that he would be enacting a law on public procurement that should ought to cover this I think when I talk to investors both in the US and in India there is a concern about the uncertainty of the tax regime in India so as Kiran and I were discussing earlier today more and more Indian companies are thinking of moving the intellectual property and their operations outside India and many US companies are reluctant to have any activities in India that would be perceived as activities that some tax person might treat as effective control so the end result is uncertainty of taxes is there any thinking about how to streamline that not just in policy but in the text of the regulation so that companies that are in this room and companies in India are much more strongly incentive to to invest and keep the investment in India one of the remarks I made in my in my presentation to you was that GST should make tax regime more predictable in so far as indirect taxes are concerned that should cover it of course the major worry still comes from direct taxes which is tax on income it comes from the recent recent imposition of matter on certain FII etc so we are we know the problem exists one can't deny it and since we have recognized the problem I'm sure that that's the first step towards finding a solution to it and I think in all fairness I can say that this government has been rather serious and rather sincere about not having what we in India we call tax terrorism so so therefore it it sort of put its you know footwear is whether its mother's words are because it actually didn't appeal the for example the Vodafone case in the supreme court and it has financial jately has announced on the floor of the house that he has no intentions of ever using the tax the retrospective tax provisions that exist in law having said that this is not the easiest of things to do as you can appreciate because changing the structure of tax laws in any country can be quite challenging but I can only say that the policy makers are aware of the problems there is an ongoing there is tension between this and within the central government on how to achieve this end which is a good sign again because it means there's thinking going on there are views being put on table and I hope that sooner other than later will come out with a solution which makes tax regimes more predictable the last thing on this is that we are also willing to sign and we have offered the United States also we are now currently in talks with Canada signed bilateral investment treaties which can cover some of the uncertainty issues that arise for foreign investors so bilateral investment treaties we are open to signing we have a text on our website which is accessible to all to see and comment upon and as of as I speak to you today is the last day of our negotiations with Canada we don't have a deal as yet but I'm sure sooner or later we'll have a deal with them but we have had two three rounds of negotiations yes ma'am thank you very much my name is Susan Finston and I've been a consultant in Washington DC and also work with pharma industry in fact also consulting for Wadwani foundation on MSME innovation for creation of social and economic value through entrepreneurship so building on the tax question that was just asked by by Ramesh Wadwani there are two areas specifically when you're looking at Indian tax policy that can provide incentives for entrepreneurship and for creation of social and economic value where I believe India could draw from the US and other examples the first is that right now high net worth individuals have disincentives to invest and become like angel investors or to contribute to the growth of high technology because there's no tax credit system in fact the incentives run against for high net worth individuals and if you're looking at tax policy I think looking at the policy that can incentivize investment instead of as as was said the removal or offshoring and the second is for the MSMEs themselves that face a very high tax burden proportionate to the value they can create if they also get tax breaks as in the US and other OECD level countries if an entrepreneur has to look at paying such a high level of tax on everything whether it's GST or otherwise and also there's no tax incentive for investment then it's a very high you know hurdle to clear just to consider that sometimes I feel as though MSMEs pay more proportionately in taxes than bigger companies that get very good tax advice so if it's possible to look at the high end and the low end and carve out tax policies to encourage entrepreneurship and encourage high net worth individuals to go into this angel investing as we've seen in other countries that could unlock tremendous resources that the government wouldn't have to bear for support of growth of high technology and biotechnology entrepreneurship sorry for that being so long okay by making the answer short but basically for only taxation principle whether it should be resident residents based or business based is also an ongoing debate in India and your issue of angel investors emanates from that I think some steps have been taken this time in the budget because we have announced tax reliefs for corrective investment schemes including for foreign investment and for also as for investment trusts and real estate trusts so I am not the tax expert but there are reliefs there kindly have a look and if you need any clarifications if you bung in an email I'd be happy to respond to it regarding MSMEs the question is more complex because actually what has happened is a strange the outcome of a honest effort has been unfortunate because they kept giving carve outs to MSMEs and that has created another issue that they don't get therefore tax credits when they actually sell because their sales are exempt from tax so the the real trick here is to get them back into the tax system so they able to get tax credit on their purchases you know and hopefully that would happen if GST is implemented so again I admit that MSMEs have an issue right now and it would be their interest to realize that they are better off in the tax system of the GST than outside it but outside they get no credit for the tax they pay on their purchases whether it's direct or indirect so thank you so much thank you once again for having me and I hope that I have you I have inspired some of you to come and invest in India thank you so when's the last time you had a tax conversation and laugh that much so pretty pretty unusual character but as we all know tax is one of the things that keeps CEOs up at night you know more than most of the stuff I think that makes up a government affairs conversation so it is an important conversation to have when we talk about the the environment so Secretary Marisi I really appreciate you coming and and sharing those thoughts so right now we're going to we're going to switch over to the to the skills panel so if the panelist could please come and join me on stage and and we'll continue on but thank you again Secretary well thanks everybody I think that was a pretty interesting conversation by the by the finance secretary and a good setup for the programs we're going to have ongoing throughout the day so now we're going to begin three panel discussions one before lunch which is going to talk about skills development and then we'll have two panels after lunch as well the first one looking at India's concept of smart cities and how the United States can contribute to that and then wrapping up with the final panel on make in India so investors looking at this make in India campaign to see whether or not there really is a lot that can be accomplished through that so a variety of companies that have invested will invest and also our good friend Jay Ponda member of parliament from Arissa talking from his vantage point as well on what the make in India campaign looks like from the state level so it's a little intimidating to be up here because of course one of my own gurus from my beginning in the 1990s in doing US India Tarun Das is joining me on stage I think most of you I'm sure have run across Tarun at some point Dr. Ajay Kella who is the CEO of the Wadwani Foundation and so a very important person in my life in my role here at CSIS and and a new person for me to meet as well Gwen Copsi who's vice president for international strategic partnerships at Boeing so meeting with the Boeing team and talking about the conference and it was interesting that this was the panel that they really had an interest in because you know you think oh it's going to be defense sales and offsets and that kind of stuff but but actually it's a company that's very interested in keen on skills development so it's really a treat Gwen to have you up here as well so appreciate you coming over so let me start with with Tarun Das if I might and I think it is three great perspectives I mean Tarun with a terrific perspective having run CI having taken a leadership role in Ananta Center on you know how we look at skills and where the gaps are and what companies what individuals what governments are doing to try to fill that so so Tarun let me lead off with you I know we're very much interested in hearing you know your thoughts on this great topic okay I'll just make five points Rick and thank you for having me here one is the history of skills development in India and just in couple of lines it was completely government for a long long time there was something there was a structure of something called industrial training institutes we call them ITIs for short and that is where skills training took place around the country managed by the ministry for labor and private sector was not in the game if private sector was in the game it was only doing skills training for their captive needs for their in company needs so that's the history when Dr. Manmohan Singh was prime minister actually in that government they started worrying about this whole skills issue and I had the privilege of chairing the first government task force on skills development you know nobody really looked at skills development as a policy as a strategy was happening and then someone he realized that you know maybe things were not going right for us and we had all this demographic dividend which could be a demographic disaster and this task force we had private sector CEOs on it as well as government people came out and said the private sector has a major role in skills development so we need to move the ball out of the government and look at private sector's role look at public private partnerships and how to take this forward in a different paradigm all together right point two point three the national skills development corporation was then set up by the government as a public private partnership corporation 51 percent with the private sector so control with the private sector 49 percent funding from the government and this corporation the NSDC which is headed by one of my former deputy Dilip Chenoy who right now I mean he could be here today but he's with the prime minister in Canada he's signing MOUs with community colleges in in Canada for skills development programs to be launched in India this has become the central agency in the country to drive skills development but it is working essentially with the private sector which is new to the game so it needs a little bit of support infrastructure maybe funding and it is led to in the last few years several hundred private sector companies coming into skills development actually as a business it's not charity as a business so I wanted you to name understand this evolution and then more recently in this government Mr Modi has set up a ministry for skills and entrepreneurship so he has a cabinet minister heading there a young cabinet minister and what he's done is every single ministry was dealing with skills for their own areas okay the health ministry the education ministry the civil aviation ministry and it was chaotic you're like anarchy everything has been collapsed into one place it's now coordinated and driven through the ministry of skills working with the national skills development corporation that's the government structure now I want to talk about the last two points is about the US and India and skills development and I know Ajay will talk about what they're doing and Ramesh Vadvani referred to that in his opening remarks this morning I see skills development as a huge business opportunity for US companies so it's one is for companies doing business there needing the right kind of people and training them and all of that so that'll be the Boeing's and many other companies but forget them you have amazing firms here who do training work across the country you've got an infrastructure of firms who train people and if you just see websites and you see the internet see how many firms that are what I'm saying is you have a business opportunity in India you don't need to take on all 500 million people why don't you just take on a million you want to train a million people and make money at it it's there so a business opportunity in India is not only about products this is a product of a different kind this is a human resources capacity building product which you can provide and the market is there it's a 500 million plus market who we are trying to skill and train and the national skills development corporation is driving this working with private sector companies so your private sector companies want to come in there and work they make a beeline for the national skills development corporation connect with them and find that there is a market and there is support you know there's actually financing support available to help you to get into the market of human resources capacity building so I wanted to bring this different dimension into the conversation today the next point is apart from the size of the market this is going to be a continuing market this is a long-term market this is not going away you know this is not about buying 30 aircraft or something and you know then depending on after-sales service or spare parts or whatever human beings in India have got to be trained for the next 100 years we better start using other than aircraft for the panel here so we got an expert so I'm looking at her she's going to come in and they know but what I'm saying is that this is a continuing market forever and because we have hundreds of millions of young people who need training who need development there it is you know it shows you the size of the market I'm not sure whether in the US skills development is seen like that you know as far as India is concerned is it seen as a market is it seen as a long-term market and then if you take what mr. Marishi said just now forget the whole of India take one state in one state you have to train a million or a couple of million people just work with one chief minister one state government and focus so one company or two companies can go in there and say I will work with Rajasthan they've got great labor laws they've changed everything they've got a great investor friendly administration the chief minister is very pro working with the US I will go and work with them and the national skill development corporation will give me back up so give you confidence hand-holding and get into the market and focus on one geographical area in India not necessarily look at you know the whole of India I feel and this is my last point your smaller firms who are hesitant about India because it's tough to do business there it's complicated but this is green field there are no regulations there are no regulations you can go and and the cost the low the commitment of money is nothing you know you don't have to build a building now until you make your millions you don't have to invest in fixed assets you can rent space you can rent so it's a low-cost operation there are margins there and smaller firms in the US in the services sector who are providing training to people here can actually look at that country look at India as a very good market so it's a way of also getting into that market at an SME level not necessarily just the big corporations thank you good great thank you time well since you wrapped up mostly looking at at the private sector then maybe go in i'll transition to you since as a private sector player here and how you look at the skills development market in India so if i can turn it over to you to okay sure and i'm going to step down here in your podium yeah great that's a good thing so thank you i'm good can you still hear me all right good well let's see when we look at India you know India stands today as the world's largest importer of defense equipment Indians government under the leadership of prime minister Modi and you've heard a lot about this this morning has realized the importance of reversing this trend with initiatives such as making India expected to provide further support to locally manufacture and assembly defense equipment this effort is more than just an aspiration India has both the capabilities and the government support to transform the country into a net exporter of military hardware and as we consider India's ambitious path we have to consider a few factors that will be important along the way now first we realize that India is a late entrance to the export-led manufacturing model that has transformed economies around the world like china and other southeast asian countries in earlier decades India seemingly skipped from manufacturing as the economy transitioned from agricultural to services but is quickly gaining capabilities and momentum in the manufacturing sector second we have to take into account the consideration the necessary conditions to grow domestic defense manufacturing including sound infrastructure predictable tax policies as we talked about earlier today pragmatic labor laws and government incentives and above all however it's the availability of the skilled manpower that is the most important enabler because without it India cannot sustain a competitive defense industrial base so for aerospace and defense manufacturing the required talent pool can be broadly classified into two areas one is the engineering and the manufacturing and the management pool and the second one is the frontline factory worker for india the talent pool and engineering and management is currently abundant in other industrial sectors and could be applied to the aerospace domain with moderate effort the real challenge however is the pool of frontline factory workers india currently does not have a large enough workforce with such skills as precision machining fabrication and assembly to meet the needs of aerospace and defense companies this shortage of talent for skilled frontline aerospace factory workers in india creates a vicious cycle of skilled capability output mismatch the skills are in short supply so capabilities don't grow and as a result the output of the indian aerospace manufacturing sector remains stagnant the ripple effect then takes over a shortage of skilled workers does not attract fresh investments which further reduces opportunities to grow skills and it ultimately limits the signal significant growth in the india's aerospace and manufacturing area and defense companies so how do we bridge this gap between what india has and what global aerospace and defense companies need and to answer that question we need to take a look at the progress and limitations for indian aerospace and defense companies since opening since the opening of india's defense sector in 2001 we are seeing private companies showing interest and participating in aerospace manufacturing unfortunately the effects of the sector being closed to foreign investment for so long still does exist both public and private sector manufacturers have gaps in their aerospace manufacturing skills because indian companies simply were not exposed to the global aerospace and defense manufacturing requirements now indian companies are increasingly gathering the skills to manufacture specific work packages for major companies like Boeing and others but those skills are specific to that project that that company is working on that limits true skills infusion that would enable a company an indian company to grow and compete for more diverse and complex work in the future certain indian companies have invested in their own aerospace manufacturing sales and their skills development infrastructure in the form of labs equipment curriculum and trainers however many of the emerging micro small and medium enterprise companies simply cannot afford to make such investments and further complicating matters is that there isn't a single agency in india that can authorize at this time an aerospace manufacturing curriculum and provide industry recognized certifications and while some may hope that increasing the foreign direct investment limit would encourage foreign companies to help overcome the challenge that many may not that may not be the case foreign companies may be reluctant to make such investments given the reality of current skill levels and the length of time it requires to scale up so i'm going to return to that question how do we bridge the gap between what indian companies have and what global aerospace and defense companies need one suggestion is to start with the policy design to maximize the partnership between the two between the two indian defense offset policies indian offset policy can be the right tool to develop aerospace manufacturing skills and indian industrial base and break the vicious cycle the indian defense offset policy was first published in 2005 and mandates a minimum of the foreign companies to invest 30 of the value of the products that they sell back into india and the policy has undergone several revisions since 2005 to help further enable the development of the indian defense industry one of the stated objectives of the defense offset policy is to is to foster development of internationally competitive enterprises they want to be able to export out of india and have a robust defense market however the policy does not currently encourage or prioritize the imparting of skills to indian companies so changes to the policy that would provide foreign companies with the necessary incentives to invest in the skill development infrastructure of the country could help bridge the gap and as the skills development infrastructure grows from both foreign company involvement and skills development and establishment of industry recognized certification india companies of all sizes will have an opportunity to get the necessary training and certifications as the cycle of skill capability output is broken foreign aerospace and defense companies will have further incentives to incorporate indian companies into their global supply chains as capabilities go up and the risk of execution go down all in all this would result in what we call a win-win for all stakeholders the government of india certainly indian industry and the foreign aerospace and defense companies because we're able to add significant value to our supply chain by these very capable indian companies so that concludes my remarks great thanks Ben thank you well that's a that's a new new angle i think to take a look at at offsets i've heard you know a variety of industries talk about these dollars generated through offset requirements is plugging this hole and that hole and sometimes it's a tenuous grasp at best to what the purpose of an offset policy is but to actually provide the education and tools for indian manufacturers to get up to speed i think is a pretty novel novel thought along those lines so we've taken a look at what government has done what private sector has done and of course with the foundation it starts with a number getting so many people into jobs rather than kind of building it up from the business side so ajay can you sort of walk us through you know the foundation and how they approach this idea of getting people into jobs in the role that skills play is it in doing so okay so i'll happy to do that good good morning to everybody and rose at the break i was told that i need to be here romesh had a crisis with one of his companies he runs 23 companies so there's always a crisis but one of them happened to be right now and since he'll says since his companies generate most of the well that i get to spend i'm happy to happy to substitute for him so let me talk about the skill gap why is skill talked about globally today so let's start at the top and then i'll talk about what is it that we at the foundation are doing as well as what are the other organizations on the in india that are doing on skilling so today the skill gap is a global phenomenon what academia is producing and what industry wants there is a huge huge delta and that's reflected in what's happening if you look at india today even the it industry where the indian in the indian software engineers are rated the highest nascom which is a industry body they did a recent study on the graduates that are coming out of indian engineering organization and 80 percent of them are unemployable so you don't have the talent that there is so if you look at infosys which is one of the largest indian it companies they've set up a large campus in my soul where they're pretty higher students are the higher students on graduation they put them in a one-year training program before they engage them in jobs also on the u.s side even developed economies have a problem with the skill gap today about three years ago when we were looking at data and and the reflection of a skill gap is really it shows up in youth unemployment because these are students that are graduating and they are not employable three years ago when we looked at the u.s data there were about eight overall unemployment was somewhere around eight percent youth unemployment was 16 percent and youth between 16 and 19 was close to 24 percent at that time about four million jobs were open in the u.s and 60 percent of the employers were complaining that they can't find the talent to fill the job so i think you have talked about that as well so that that phenomenon exists today in fact now if you look at the data today the unemployment rate in u.s has gone down to five percent but still the youth unemployment is three x and the open jobs have gone up from four million to close to six million so another reflection that it's the skill gap that is causing the issue so about three years ago we as a foundation said what can we do in this area and since we were focused in india we started in india with the skill or it's a massive problem india is adding about a million people a month to the workforce so every essentially every month about a million youth are turning 18 and are entering the workforce or they are going to colleges so there's there is a massive demand when we looked at the entire skill pyramid we found that if you looked at an 18 year old that's graduating 12th grade about nine million students graduate 12th grade in india about four million go to these three year four year colleges that are existing four and a half million students are left behind and in this day and age 12th grade education with a knowledge economy taking shape 12th grade education is not enough the new k-12 is really the new k-14 i think president of verma also recently talked about making community colleges free in the in the u.s and india has nothing really so there is a 12th grade and then there is college education so in between there is a huge gap and this is what i think the road and others had looked at the problem and set up the national skill development corporation. We as a foundation are an operating foundation most of us have spent time in the valley so we we wanted to bring in technology innovation to scale to address this problem so what we are doing is so we targeted 12th graders that are not going to college and for them in in u.s or if you look at the similar data 25 percent of us graduates go to four year colleges i think some of you will be shocked by that number but the number really is only 25 percent of us graduates go to four year colleges about 46 percent go to community colleges which are the two-year program so the community college model in the u.s was a very good model just like tarun talked about u.s training industry can have an opportunity to go to india and train the 500 million youth that we are talking about u.s community colleges have an opportunity to set up community colleges in the u.s because there is a huge gap so we pushed that idea with the government of india at that time it was manmohan singh's government and we got good traction even there and what has resulted in there is the they have put in a legislation now where where there will be recognition of skills and training set they are setting up equivalent of community colleges which will have upward mobility into the four year college so it's not a dead end stream the indian government has now funded about 400 community colleges as a pilot and are collaborating with foreign governments tarun talked about prime minister moody is in canada now signing up agreement with the with the canadian community colleges so you know we had originated and started this with us and we are finding u.s community colleges not as aggressively pushing in fact canada and germany and australia have jumped on to this bandwagon u.s has not so it's an opportunity in the u.s to jump on to this coming back to the foundation while these colleges are getting set up i i think we cannot wait for these infrastructure to come in place you know if we go back to the brick and mortar model of educating that large population it will take decades if not half a century year so we as a foundation said why don't we leverage technology to impart this so the foundation focus has now shifted from sort of setting this mechanism in place to investing in what we call the soft infrastructure the soft infrastructure essentially is creating pedagogy creating or learning modules today how many of you when you're stuck trying to learn something go to youtube and watch videos show fans oh not bad exactly so that's what we are trying to do essentially is to transform so the way we started this as a pilot actually we are doing this both in the u.s as well as in india let me talk about india uh india has about 1.2 billion people as you know health care is a major issue nurses and nursing assistant there is a demand for somewhere around a million nursing assistant in the next five years uh you don't need a college degree for that you can take a 12th grader put them through a one year or an 18 month program and they can become nursing assistants earning family supporting wages in the absence of community colleges in the industry was doing that job so we went to the industry and said give us the content that you have uh this is really not your job of training your job is to take care of the patients we will work with us we will transform your content which is very teacher-centric and non-scalable and transform it into videos animation and gaming and offer it through the cloud to everybody in the industry so about 18 months ago we worked with one of the hospital chains today we are working across five big hospital chains about hundreds of hospitals that have adopted this program similarly on hospitality we are doing the same thing uh and we are now entered into an agreement with the defense industry uh defense industry needs a lot of you know support all the equipment that you are importing from defense need to be maintained and managed so we are building up those those platforms so essentially long story short the investment in skilling can sort of only happen through leveraging modern technology to address the problem at scale and that's what we are trying to achieve that's terrific Ajay thank you great um we've got a few minutes for questions and i want to start off you know one thing that i've learned i think most of all by getting to uh uh shadow uh taran over the years is uh cutting to the chase and knowing what is the flash and what is the substance so one issue on education that i think captures a lot of attention here which we didn't talk as much about is american four-year universities and is there a role they can play in contributing to skills and education in india and this bill comes through and it hasn't passed yet about allowing foreign investment universities is that a game changer is it not some schools don't like campuses overseas you know what's been your experience do you think that there's that much of a role uh for american four universities to go there set up do things or is it going to be you know other models the private sector model community colleges do you have a sense on that rick i think we are sending about a hundred thousand students to american universities each year okay uh that will only grow because the kids want to come to america to study it's not just studying in an american university in india if there was a campus then it is the whole experience of being here being on campus you know all of that international students etc etc so that's one point i think they the drive that he that that hunger to come here to study is not going to come down it's going to just grow grow and grow and grow it will we'll have to see your university's capacity to take more and more kids coming you know depending on size of classes and all of that second what i have seen in my conversations with american universities is that they are able to set up a small center in india but they don't have resources to go big time into setting up you know so they need then an indian partner or or a partner who will provide funds for for doing that now so private universities are happening in india now uh there's one great example of the ashoka university near deli which is funded by private sector entrepreneurs they have collaborations with individual universities for different disciplines so in a way you're transferring the teaching and the know-how but you and you're getting paid for it again it's like a business opportunity which is great for the university but it is not an investment by the university in terms of money going out because you need the money here and i think after the financial crash in 2008 i think a lot of universities endowments you know were impacted big time so my sense is there'll be different ways that universities will get involved a lot of it is to recruit students to come here actually it's a marketing office you know it's a liaiso come marketing office but as ajai mentioned community colleges are still not seeing the business opportunity in india today the prime minister's team will sign up with 16 canadian community colleges 16 today in autobahn the national skill development cooperation ceo is coming here tomorrow for other meetings and he was telling me that he will sign two agreements with two community colleges one in austin texas and one somewhere else but it's like you know more the exception than the rule so i think we have some work to do here in opening the business opportunity to community colleges it is a business opportunity as i said it's not charity and all that and people like ajai and all who are here and the badwani foundation can actually be very helpful in this process you know when india is not the first country on earth to take a look at aerospace and think i'm going to be the next big aerospace player you know talking about trying to help workers get the skills to be able to to do that have you seen a country that has committed itself to you know really kind of imparting the sort of education in a relatively short period of time to become competitive or is india perhaps trotting a bit of new ground if they're successful in doing this well i mean i think i'll just kind of focus on india with the answer to your question so i mean our experience in india with with working with the industry there and we do have quite a few industry partners that we work with is that they do have that requirement for employees have certain skills and so what we've found and we've invested millions of dollars in india with people that are helped to develop supply chains help provide skills on program management help provide some of the technical skills on the trades etc and but we've typically done it based on where we're sourcing the work so we do it by a company by company basis to pin up on their needs and that certainly is one way to get there but it's not the way to get there probably the fastest that you would want to get so so i absolutely agree with a lot of what you two gentlemen are saying here about how you need this more broader focus uh and i'm and i'm going to speak specifically for aerospace and defense because you know i'm part of the boeing company and that's what we're interested in and i think it's it's it's encouraging having a model that encourages companies that are in india for the long term which the boeing company certainly is we've been involved in india for a long term certainly on the commercial side more recently on the defense side but there has to be uh an encouragement and an incentive for us to to do uh more broad training and development and certifications for the kind of skills that are necessary um for uh like a whether it's a sheet metal worker an assembly a person that does assembly uh quality you know quality management all those kinds of things that are inherent in the certifications that you need to get for aerospace and i would say the companies that the countries that have done it well is a lot of what they do is they do encourage it through their policy and through some other offset policies as well it encourages and recognizes the importance of skills development as they look at projects that would be acceptable uh for for defense offset and that's something that i believe you know and i'm touching a little bit is that's one of the policy changes i think that we need to look at in the future and india has done a tremendous job at continuing to enhance their policy on defense so that it really benefits and achieves the objectives and the vision for more make in india and growing that defense industry but i don't think right now it it really incentivizes companies to do a more broad reach across multiple companies who they maybe aren't even going to be working with directly but maybe their supply chain could or other competitors it doesn't currently recognize that in a way that encourages people to do it for the broader base we'll do it for the companies we're working with and we're doing that but that's going to be a step by step approach and that won't get it you won't get done as quickly as you would like in terms of you know the vision that you'd have for the country to really grow their defense industry well one more question from my side and then i'll open it up and for for ajay so i've seen it a number of times over the years an american organization whether it's a company or foundation comes to india and says i'm here to help and even though it has strong india roots already what's the receptivity been i mean i obviously you're coming only to help and and what's the receptivity been at the center and state level when you say that you want to do this are they willing to open up and partner with you did it take a while like because that's one thing that turns again whether it's companies or foundations turns people off with india sometimes they don't see that responsiveness so what's been your engagement with government how's that impacted things um surprisingly quite well i think but it's not silicon valley standards either or it's not even business standards it takes a while the mission the mission of the bureaucrats and ministers is yes it is to do good but at the end of the day also it's the ward banks and chasing that so there is sometimes there is conflict but just to give an example right we we started working with the indian government only three years ago on the skill development side and one of the other initiatives we have is on entrepreneurship to give you a flavor on skills development a we were able to put in this policy working there was something in the pipeline anyway but it helped put in place the vocational education skill development as recognized and upward mobility they have funded 400 colleges today we have taken our online skilling into thousand schools around four states in india um just last month we signed an mou so now now we are the stage where we have done thousand schools uh thousand high schools and 400 community colleges at the at the various state level and one of our other initiative is entrepreneurship we've been doing that for 10 years the idea there is to take a college student and inspire and educate them to become entrepreneurs because we can rely on the tatters and build us to create companies we want our students to start creating companies or and that that is happening so today the foundation is doing somewhere around working through 500 institutes in india and they are our students are creating 1000 companies on graduation every year each of them create about 10 jobs so it's about 1000 companies creating 10 jobs is 10 000 job it doesn't have an impact on a million jobs a month so we were looking at taking what we had built over 10 years on entrepreneurship over three years on vocational education and scale it 10x and 100x so the ministry of skills and entrepreneurship as an example signed an mou with us to take what we have developed and scale it from the thousand colleges that exist to 50 thousand colleges all they need to do is sort of come in and say okay vocational education is a requirement every school we have the soft infrastructure in place to deliver the content so that's an example similarly on entrepreneurship we are we signed an agreement to take from from our 500 colleges to 5000 colleges so we can increase the order of magnitude of entrepreneurs that are created all of this has happened over three years all of this has happened in two years of Modi's Prime Minister Manmohan Singh's government and one year of Modi Modi government with the Modi government what we are getting energized and excited about is we are talking about taking from numbers from thousands to millions and the problem in India is in the millions it's not in the thousands if you can do thousands and you're only impacting a very small segment you're not solving the problem so our vision has always been addressing the problem at scale through technology and we are very hopeful we'll be able to do this Ramesh earlier talked about when he visited he met the Prime Minister in September visited in February and we met with four ministers and with all those four ministers we're now signing MOUs so things things are moving a lot more rapidly than then we would have expected government of India to move I think also I would also encourage working with the states because most of this implementation happens in the states so the states are far more receptive and far more eager as well while the center sets the policies and can dole out a lot of cash the implementation happens at the state level and so you eventually have to work with the states great great but we got a couple of minutes before lunch and so I'll open it up to the floor to see if anybody else has questions quite a few great great well we got a couple of microphones coming around so let's start on the side over here and if you could state your name and and who you represent and then try to keep it relatively brief please and my name is Rosemary Segero I'm a president of a a profit campaign called Segero's international group and a non-profit called hope for tomorrow all doing the same thing I'm a USA company based here and I come from Africa in I think we have more Indians in Africa and even my grandson is in India taking law in India looking at what you have explained I think vocational training is very very important and that's what we are trying to do with my company in the rural areas of Africa and my organization focusing on skills training and training so looking at using agriculture products to export to the US and other countries around the world so what you say it is very important so how do we make this technology or collaboration working with countries other countries like what you are doing exporting to the US exporting to India and other countries I think technical institutions vocation is very very important so how can we collaborate and work together to make this happen thank you well I'll just say real briefly I mean we don't have a trilateral dialogue that I think is quite so substantive yet on US India Africa but it's talked about and Africa clearly is one of the places that I think American companies Indian companies and institutions have shared strengths and shared engagement so I think it is quite open right now and something that I think you know is right for discussion but really underutilized at this point so it's a it's a terrific message I don't know if anybody has anything else to share on that obviously the foundation is moving into Africa pretty soon more on the entrepreneurship side than the skill side at first actually both is it both okay so he's going to be living this so there you go you know you're going to catch up with at launch there are Indian companies who are setting up skill centers in Africa people who are engaged with African business in a big way and we can maybe connect you to some of them great yeah up here at the front yeah Dave Ramaswamy I'm a consultant and journalist in agribusiness my question is you know India with one third of America's land area has the same has more arable land and yet the Indian agriculture sector employs 65 percent of the population with only 13 contribution to GDP and as a result similar to the job growth rates in the last 10 years the agriculture sector has grown at only 2 per cent per year so my question is given the productivity gap and consequently the nutritional gaps that exist in agriculture how do you see skill development and entrepreneurship to increase the nutritional content in India as well as create a whole bunch of new food entrepreneurs thank you food entrepreneurship interesting I'll have a crack at it I think we are going through a whole process of changing Indian agriculture you know small holdings small family situations uneconomic low productivity and all of that to bringing in more technology and because the next generation do not want to work on the farms they want to move to urban locations they want to get into IT or financial services or whatever you know manufacturing maybe so I think you will see a transformation in agriculture happening it's a slow process because they're in the rural areas but if you go into say you go to a town like Gurgaon which is just outside Delhi it's a new new town township and you go into all the malls the lots of malls there the the sharp assistant is a rural kid he has he or she has got some elementary English knowledge can operate the equipment there in terms of you know in voicing receipts and all of that and is able to deal with the customer so they're all being absorbed say into the retail sector if you go into private hospitals in the again in the same township you'll find people have come young people have moved out from the rural sector into jobs as you know hospital assistants doing administrative work or whatever so there's a migration taking place and that migration is happening with training to equip them for their new jobs it's happening right across the country I'm only talking about Gurgaon because I live there outside Delhi and I'm I'm familiar with it and I see it all the time we have to raise agricultural productivity but that's a different subject I think the real issue is what are happening what's happening to the people there I think the people the young people want to move out so there'll be many less people dependent on agriculture as we go forward which has happened the world over so it's nothing you just happens with technology and urbanization and all of that what is all the smart cities all about it's basically a hundred new townships in India where your catchment area the boys and girls from the rural areas are going to come there so we are going through a kind of a silent revolution in India people migration revolution a skills revolution a technology revolution because you can't deal with all the problems unless you use technology all of that but I think we are we are heading in the right direction and there's new energy right now in India which which hasn't been there for many years yeah just to add to that I think there are a lot of questions so maybe a lot we can talk offline well just about lunchtime so we'll take we'll take one or two more depending on how long yeah let's let's start up at the other front here the third row back coming up on the other side yeah terrific my name is Ramesh Kapoor I am a president of U.S. India Security Council the present time my question is what is your relationship with with other Indian organizations that are doing the same work one is specific is American India Foundation how are you partnering with them and how are you scaling with them because that organization is for over 10 years or 12 years now in doing charities in India right so we we are an operating foundation we are trying to really leverage technology to scale but simultaneously we don't do all the work ourselves and you talked about the America India Foundation we have been partnering with the American India Foundation for the last three years now one of our initiatives is is driving mainstreaming the educated disabled into corporate jobs in India and that's where we have used America India Foundation and several other NGOs that are doing skilling a lot of these organizations were skilling but they once integrating the disabled into the skilling process so we've worked with them to integrate the disabled and are working with them we can do this alone so I think the key partners that we envision to scale to the numbers that we are looking at are the three beneficiaries really one is the the primary beneficiary on job creation skill development is the government so government partnership is key these second beneficiary is the corporates themselves the industry at the end of the day if if the industry is getting well-trained people that they can employ from day one they are saving on their training costs so they are actively engaged with us now sitting on the table helping define the content helping roll out the content and the third beneficiary are the students themselves and to reach them we will we are using variety of partners like the America India Foundation we'll take one more I see a hand Marshall back there in the in the back Marshall Bhutan I just wanted to follow up on Dave Robbosami's question to Taran about agriculture and I agree entirely with the depiction that Taran is given of what's happening in fact you know the rural labor force is declining labor wages and the rural sector are going up it's becoming it's one of the drivers of change in Indian agriculture but I wanted to I think something was lost because I think David was pointing to entrepreneurial opportunities on both ends of that supply chain the agricultural side this is going to inevitably produce consolidation new forms of cultivation not not aimed at sustainability but it's supplying food to the cities and then along the chain transport and logistics to supply food to these increasingly mega cities and finally food production itself food processing food retailing are also awaiting a real revolution in Indian industry the double walla is going eventually to be a thing of the past and Indians already gravitating to chains mostly of western origin but increasingly of Indian origin so I think the food the whole ag to food supply chain has a tremendous opportunity and very little skill development for that purpose I think I think it's quite I don't know if it needs a broad agreement I think from everybody up on stage here Marshall well good well hope you join me in welcoming and thanking the panel for this for this start of discussion here on skills now clearly there's got to be a business model for this there is already companies have to look to take advantage you know as Gwen mentioned you know countries have to look at all the resources they have at their disposal such as offset policy and things to try to implement that and the great work and especially the Indian government I think state center and state level has actually been welcoming for this which you don't always hear when we talk about India so that's I think should should warm our hearts a little bit of course on that discussion a lot's happening up in Canada today so those 16 community colleges that can be a lot more ice hockey in India I think in the years looking ahead so right now we're going to break for lunch we've got sandwiches in the back and so to that end let me also recognize once again the the sponsors that helped make today's program possible so Corning Prudential our good friends at Taj hotels and Tata Oracle corporation so thanks to them the sandwiches are on them as well as the drinks after it all wraps up and then for those speakers as well we've got a lunch on the ninth floor so if you were indicated before about joining that lunch then please see our team over at the elevators we'll reconvene at 115 thank you