 Well, that's a pretty starting start to take discussions. You know, as I sort of mentioned at the outset, if we were to do this conference, I think a year ago, the mood would have been extremely different. You know, near the end of the UPA government, there were dramatic concerns that American companies were raising about cross-border tax issues, about patent issues, about local manufacturing rules, and also I think what we saw is slower progress on encouraging new reforms, FDI caps and things like that. And it triggered what I think we all saw in Washington as a pretty big backlash. There were congressional hearings, there's requests for the U.S. International Trade Commission to conduct surveys on how American companies see the business environment, whether or not it's gotten better or worse in India. So it really, I think, things began to escalate pretty dramatically and in a very negative fashion. You know, since the time I think that the election has taken place, I still personally find the mood in Delhi is still a little bit wait-and-see in Washington, I would say, kind of the same thing. But at the same time, you know, there has been, as our speakers have pointed out, movement on a number of issues. I think, you know, even a thing like insurance, which moving the foreign investment cap from 26 to 49, and I think those of you that know me know that I've spent a lot of blood, sweat, and tears on that issue over the years, you know, it's a small issue, but to see that the government actually was going to spend political capital on something that is only so targeted on foreign investment and on changing the environment is a great signal, I think, for investors across the board that indeed, you know, the government's first priority is spending political capital on issues that will stimulate growth. Foreign equity changes in defense in a variety of other sectors, I think, too, have given a bit more enthusiasm, and partially I think that's contributing to the strengthening of numbers that I mentioned during my opening. So, you know, I feel that there's been great steps taken. I mean, the coal reforms, I don't think get nearly enough attention, but India imports about 1% of GDP and coal. There's coal in the ground, but they have to import 1%, because, you know, the way that the sector was structured, the companies just weren't getting it out fast enough to get to the places that needed to go. So reforming the coal industry and allowing private companies to come in and foreign companies to come in, you know, these are, I think, some pretty substantive reforms, too, that maybe have fallen a bit under the radar screen. So I think that's a great setup for what we're going to discuss for the rest of the day. The speakers so far have been far more efficient than you typically see at conferences, so I think we got a little bit ahead of who was scheduled to be our next speaker, Catherine Novelli. But I see that Arun is here already, so allow me to introduce our Assistant Secretary of Commerce, Arun Kumar. So we'll jump the order a little bit here if that's OK with you, Arun. Great. So Arun Kumar, many of you I think have already known, especially if you're coming to an India conference, he must be a very familiar person to you. So he took over as the Assistant Secretary of Commerce for Global Markets and as Director General of the U.S. and Foreign Commercial Service. So he leads America's Trade and Investment Promotion efforts. And if any of you had the opportunity to attend or to watch the SelectUSA Summit last month, that was Arun Kumar. So he's one person in this room, I can't complain about the organizational efforts about this conference because that was about 150,000 times as large. So Arun has done even bigger events than this. I go back with Arun for quite some time. Arun was a member of the board for KPMG and led the West Coast Operations and got them active on India. He was also a board member of the U.S.-India Business Council at the time. So I always feel I have to act on my best behavior since he's been overseeing my work for quite some time. So Arun, please welcome you to the lectern, sir. Well, thank you, Rick, for that very kind introduction. And also for the opportunity for commerce to step ahead of state. It is very rarely that this would occur. So it's also great to be here with Ramesh, whose accomplishments, intellect, and humanity I greatly admire, and also his wicked sense of humor. You must have caught that in the description of his meeting with Prime Minister Modi. But discussions like today are very valuable for U.S. government and the private sector as the United States deepens its strategic and commercial relationship with India. So let me start with a slice of history pertaining to the U.S. and India. U.S. diplomatic relations with India started in the commercial realm. In November 1792, President George Washington named Benjamin Joy, a merchant from Newbury Port, Massachusetts, to the United States Council in Calcutta. The British government accepted him, but only as a commercial agent, because Cornwallis had just left Calcutta a few months before, and the memories of Cornwallis' defeat were still fresh in the British leadership of India. Well, today we're delighted that under our 44th President, our commercial and economic partnership with India is central to our relationship. While commercial ties between the U.S. and India date back, as I said, 220 years, the ability to optimize and grow this relationship has never been as high as it is right now. The reason I say this is because of the alignment between our countries along three dimensions. Incredible growth potential, robust economic policies, and deep motivation in spurting greater trade and investment. In fact, much of this is driven by the Indian economy. In terms of growth potential, IMF estimates of India's growth at 7.2% this year, and 7.5% next year, suggests that India will soon become the fastest growing large economy in the world. The U.S. of course welcomes India's growth. In terms of robust economic policies, Prime Minister Modi's electoral victory last spring has been seen by many observers as a message from the Indian people on the need to revive India's economy. And a piece of good news recently was that Modi's reaffirmed India's BA3 rating and revised the outlook from stable to positive. So U.S. businesses too are hopeful about the changes in the business environment based on the initial steps that have been seen to date. For instance, a new government committee dedicated to fast-tracking American investments has already made a positive impression. Last month, the Indian parliament, as you know, passed legislation allowing for more foreign direct investment in insurance and defense, as referred to just a few minutes ago. And the U.S. business community is watching closely to see what happens with the land acquisition bill that will open investment, what happens with the land acquisition bill that will open investment by easing industry acquisition of land. In terms of deep motivation to spur greater trade and investment, India has to cater to the needs of a growing population which is expected to exceed China's by 2030. That means India needs to create almost a million jobs a month to support one of the largest urban migrations the world has ever witnessed, to continue to lift its people from poverty and to further expand the middle class. As for the United States, we have a major focus on trade and investment programs that have been enacted by the president and executed by the Commerce Department. Notably, our efforts to boost exports through the National Export Initiative and to boost foreign direct investment through our Select USA initiative. In fact, since the launch of both programs, we have seen five consecutive years of record exports and we are the largest FDI recipient in the world. And while the United States has emerged from the recession with a stronger economic footing than any other nation, job creation and robust growth remain at the forefront of our economic agenda. Our approach to making progress on the bilateral commercial agenda with India is therefore straightforward. We are actively working to identify areas of mutual economic benefit. From the U.S. side, the Commerce Department sees a number of areas where we can work productively with the Indian government to spur India's economy and increase bilateral trade. These include infrastructure development, enhancing India's business climate and enhancing market access for U.S. companies in sectors that will help Indian companies integrate into global supply chains. For its part, India can be an important contributor to continued U.S. economic growth. Our trade with India correlates nicely with India's own GDP growth. India's growth thus directly benefits U.S. exporters and creates jobs in the U.S. So the United States and India can get the economic relationship right. The result can be the ultimate win-win. We can help grow each other's economies, create well-paying jobs and bring our governments and our peoples still closer together. More to the point, unlike 1792, our commercial ties can and will be all-encompassing, government to government, business to business, and people to people. There are in fact four specific initiatives we are engaging in that encompass all of these levels in order to expand and deepen the commercial relationship. The first one I would like to mention relates to SelectUSA, a program that I mentioned earlier. Through the SelectUSA initiative, my department encourages foreign firms to invest in America, which will help create U.S. jobs and enhance the global competitiveness of the firms that invest in this country. In fact, India is the fourth fastest growing source of foreign direct investment into the United States. Just three weeks ago, over 80 Indian companies were right here in Washington, D.C. Do you hear the president speak at the SelectUSA Investment Summit and explore investment opportunities in the United States? This delegation was more than double the size of the delegation at the previous such summit 18 months ago. The strong delegation reflected our shared economic interest in heightening our country's commercial engagement. For example, Strand Genomics, represented at the summit, is a genomic analysis company and a subsidiary of Strand Life Sciences in India that is a growing presence in the United States. Strand Genomics recently announced an initiative with healthcare global enterprises to provide personal cancer genomic services. Another example of innovation represented at the summit was at a GenZ, a Mahindra Group company. GenZ designs its electric two-wheelers in Palo Alto, California, and assembles them in Ann Arbor, Michigan. From the other side, U.S. investments in India continue to grow. In February, U.S. Ambassador Verma joined Prime Minister Modi to inaugurate GE's plant expansion in Pune. It is a $200 million upgrade to an existing facility and is the first multimodal industry manufacturing facility catering to the needs of its diverse businesses, from power to aviation to transportation to healthcare. Just last month, Ford India inaugurated its new manufacturing facility in Sanand, Gujarat. The plant will be a center of excellence for small cars and low displacement engines for both the domestic and export markets. It is expected to create almost 5,000 jobs in addition to the current workforce they have in Sanand. The second initiative is the U.S.-India Strategic and Commercial Dialogue, or SNCD, which adds a commercial component to what was formerly the Strategic Dialogue. Secretary Pritzker will lead the commercial track of his dialogue while Secretary Kerry continuously leads the strategic track. And I can assure you that both secretaries are energized and eager to enact additional concrete steps to take the commercial relationship to the next level. A major goal of the SNCD is to achieve a positive sum dynamic that facilitates near-term trade and investment outcomes for U.S. and Indian industry and fosters long-term strategic economic collaboration. While the volume of trade in goods and services between the United States and India has more than tripled since 2004, there is room to grow. According to a U.S. International Trade Commission study, India only accounts for 2% or less of total U.S. exports of foreign affiliate sales and investment in 2013. Similarly, despite being the world's 10th largest economy and 10th largest importer, India was only the 18th largest export market for the United States in 2014. Well, now is the time to change that. Working with the Modi administration, our vision is ambitious. Increase two-way trade from nearly 100 billion to 500 billion in about 10 years. We also look forward to working with India's government under the SNCD on steps India can take to attract U.S. and other international companies consistent with the Prime Minister's goal of placing India in the top 50 of the World Bank's easy-doing business index. Additional steps by India to address intellectual property rights challenges will help create a more inviting business climate. We will also aim to bring in private sector perspectives and demonstrate concrete commercial outcomes for Indian and American business. Our private sector has a lot to offer in terms of best practices in industry sectors like infrastructure, including power and urbanization and defense, infrastructure finance, and integrating U.S. and Indian small and medium enterprises into global supply chains. On supply chains are U.S. supply chain service providers can work with their Indian partners to increase their understanding for optimizing inventory levels and transportation routes to make them more competitive globally. As an example, for handling temperature-sensitive products, U.S. companies can work with their Indian partners to ensure that proper facilities are being used, proper food safety handling procedures are being practiced, and workers are properly trained to address various products, including agricultural products, pharmaceuticals, and biomedical products. These innovative supply chain technologies and advanced skills can also create many benefits to other sectors dependent on the core chain system, such as retailers, marketing groceries. Overall, through increased training and the development of the talent and the management required to run an efficient supply chain, firms will be able to meet global consumer demands for higher quality products at reasonable prices. This leads me to the next topic. Infrastructure and smart cities. Commerce has also been particularly hard at work to foster infrastructure collaboration and help India to begin developing smart cities. Together with the Ministry of Finance, commerce launched the U.S.-India infrastructure collaboration platform in January. This government-to-government platform links India's critical infrastructure needs with U.S. private sector capabilities. On the margins of President Obama's trip in January, the U.S. Trade and Development Agency signed a memorandum of understanding to begin master planning in the three cities designated by Prime Minister Modi for U.S. leadership, Bizaq, Ajmer, and Alabad. As part of these efforts, the U.S.-India Business Council, the American Chamber of Commerce in India, and the Confederation of Indian Industry are working with qualified U.S. companies to partner with Indian companies to pursue projects that will positively and dramatically help transform the Indian landscape. We have also formed a private partnership team to begin planning in the three designated cities for U.S. industry leadership. The lessons learned along the way will be applied to help realize the Prime Minister's lofty vision of 100 smart cities in India. The public-private partnership team will position U.S. firms for success, help coordinate multiple U.S. government programs, and encourage frank discussion of financial and business environment challenges. U.S. industry in India has identified the following sectors where they think they are the most competitive when it comes to infrastructure projects, energy, transport, water and sanitation, safety and security, and healthcare. American businesses offer India unmasked technological capabilities and know-how. Commerce and other U.S. government agencies stand ready to provide sustained support to them over the long haul. And the best part of the story is that U.S. companies already have significant efforts underway. For example, the U.S. company AECOM is a program manager providing full management services for end-to-end solutions and implementation for the Dolera Special Investment Region, which is being developed as a global manufacturing and trading hub. In fact, AECOM is a participant in all of the 10 top infrastructure projects in India. Finally, there is the U.S. India CEO Forum. The forum brings together leaders of the respective business communities of the United States and India to discuss ways to strengthen the economic and commercial ties between the two countries and to communicate their joint recommendations to the U.S. and Indian governments. The forum is now about 10 years old and the creation of the U.S.-India strategic and commercial dialogue has provided an opportunity to reinvigorate the forum as a source of private sector input into the dialogue. A federal registered notice requesting U.S. companies to consider applying was issued last week by the U.S. government. We have expanded the membership opportunity on the U.S. side to provide for wider sectoral representation. In closing, at Commerce, we're investing in the U.S.-India relationship in many different ways. Our intentions are matched by our commitment of resources on the ground. In India, we have the largest commercial service footprint in the world in terms of the number of offices at various locations in any one country. As India's economic center of gravity shifts from Delhi to the States, we will be seeking out forward-leaning state and local governments to build trade and investment ties even as we continue to engage the central government in Delhi. Our potential for collaboration is great. The United States and India are natural partners with open markets and clearly defined and predictable rules that are consistently applied. There is a lot we can do together, and this partnership has the potential to be an historic one. Our partnership now far exceeds the presence of one commercial agent on Indian soil. It represents a historic level of alignment. The alignment between our policies, our desire for growth, and our ability to achieve that growth. The alignment of our trade, investment, and infrastructure sectors, among others, in the alignment of our governments, our businesses, and our people. We look forward to working with the government of India and with the private sectors in both countries to alter the bold, new chapter in the U.S.-India commercial relationship and make the most of this extraordinary opportunity before us. Thank you. Well, that is terrific. And I think both Secretary Kumar and also Secretary Novelli represent, too, really the spirit, I think, of what we're trying to do today, which is to bring together the private sector experience to help guide what the governments are doing. Because obviously, I think with Modi's election and some of the things that have happened so far really has the attention of the American private sector, the U.S. government is looking for ways to complement some of the things that Modi government is doing. And so knowing how those are commercially viable is a critical link. And Secretary Kumar's background in the private sector and, of course, Secretary Novelli's as well, I think they're some of the best champions you can have of trying to make this link between how we can engage the government on major actions the Indian government wants to see, but also have to have commercial relevance for the companies that ultimately will make those investments and develop those trading relationships. So it's now my great pleasure to introduce Under Secretary of State, Catherine Novelli. I think Secretary Kumar mentioned the combining of the dialogues that both State and Commerce had separately into a single U.S.-India strategic and commercial dialogue is gonna be a historic event this summer fall once they get that set up. Secretary Novelli really does live at the nexus of promoting economic prosperity along with environmental stewardship, which is clearly at the top of our agenda in dealing with India. Also looking at addressing global challenges and transparent rules-based, sustainable systems. Another area that sometimes has caused some contention with India as we talk about multilateral issues, but hopefully we can break through that log jam during this government and become, I think, a little bit better cooperating partners. Formerly Vice President for Worldwide Government Affairs at Apple, and prior to that had actually been a trade negotiator at the U.S. Trade Representative's Office covering Europe and the Mediterranean. So Under Secretary Novelli, please, I'll welcome you up to the lectern and join me in welcoming her. And also suffering from protests, which I don't think the protests were about our event, right, something else all together, okay. Well, thanks so much for that introduction. I am so pleased and honored to be here with this distinguished company and to talk about something that I just think is one of the most exciting things, and that is the U.S.-India relationship and how we can take it further. And I just want to thank Dr. Hamre and Rick and all the hardworking staff at CSIS for pulling together this event. And of course, also thank the Anata Aspen Center and the Wadwani Foundation for co-organizing the conference. And I really hope that there are great results that come out of this. Because for me, as Rick said when he was introducing me, I have real resonance with this topic when I was at USTR in the early 90s, the first day of my job there as being in charge of the Soviet Union in Eastern Europe, which shows you how old I am, was the day of the coup against President Gorbachev. And so I watched all these countries subdivide and everything changed. And what I saw was countries undertaking significant economic reforms because they were totally upending their systems and they were tearing down barriers to trade, they were opening their markets. And now, so many years later, you can see how much has been achieved by doing that. And India has followed a similar path, not of having a complete upending of the government, but 20 years ago its policymakers realized that their economic policies were shackling their own potential for growth. And so things have been changing and these dramatic economic reforms that lowered drastically non-agricultural tariffs, removed non-tariff barriers, relaxed rules on foreign investment in some important sectors have been ongoing. And as a result of making those changes, you see tremendous growth and you see tremendous growth in US India trade, which has quintupled in the last 15 years to about $100 billion. And so some would say, well, okay, we're done now, but we have incredible, incredible potential to do exponentially more. And so I thought I could just spend a few minutes talking about that, the future and some things that I think that are steps that can be done to really seize the momentum and to really maximize the unrealized potential that's really out there in our economic relationship. And there's just some incredibly daunting facts out there. If you think about what India's economy and what India has to do to make sure that its economy reaches its full potential, it has to create approximately 240 million new jobs in the next two decades, which is a million new jobs a month. That is just mind-boggling. And in order to achieve that target, our economists tell us that it's gonna need GDP growth of 9% per year every year for 20 years. And if that's achieved, though, then it's gonna be a $10 trillion economy by 2035, which is up from two trillion today. So these are huge numbers. It is a daunting task, and it's not gonna be easy. And it's gonna require sort of a whole of government approach, which Prime Minister Modi has actually sort of put forward, and that's what makes this so exciting. So it's gonna require leaps in education levels, healthcare outcomes, agricultural productivity, manufacturing output, retail markets, financial access, digital connectivity, physical infrastructure, electrification, urbanization, on and on and on. And what's so exciting is not just these changes that are gonna happen internally, but the fact that we can be part of this and that our private sector can be part of this, that as countries we can move forward together. And that is really fantastic. But to get to this place, it's gonna require new technology, which we have, new perspectives and these new policies. And that's gonna mean that there's gonna be some structural institutional barriers that have to be overcome. And we know Prime Minister Modi's already taking steps. He's announced a foreign trade policy with James to double India's exports of goods and services to 900 billion by 2020. There's a new budget that was released that focuses on infrastructure investment and tax simplification, all of which we have heard from our private sector are key. And this target of April 2016 for the government to introduce a harmonized goods and services tax, it's estimated could add as much as 2% to India's GDP. So these are amazing. And these are great steps, but if you think about what's happening and that India is set to be the world's largest population by 2025, clearly we have a lot of work we can do. And one of the things where I think is important to focus is to do what we can, working together to more deeply integrate India and to globalize good services and investment markets because that sort of expands your base and it's a way to boost job growth in India and make sure that the already competitive Indian companies are gonna be even more competitive globally. And obviously it's a strategy the United States followed after a time when we were very insular ourselves and found out that didn't work very well. And so we think that if we can strengthen our bilateral investment and trade relationship that we can be an important part of this change. As Arun said, we're already one of India's largest trading partners. President Obama and Prime Minister Modi have committed to raising our bilateral trade another five fold to $500 billion. And to chart that our leaders just met recently and they've met twice over just a four month period which is actually really unprecedented I think a very concrete sign of how seriously we take this relationship. And there's been some great successes. We broke through the deadlock on the trade facilitation agreement at the WTO. Through our trade policy forum we've agreed on comprehensive work plans and services, agriculture, intellectual property and manufacturing. We have resumed discussions on the possibility of a high standard bilateral investment treaty. We've moved forward on issues that were impeding Sivnuk cooperation. And we've elevated our partnership as Arun said to a strategic and commercial dialogue. So these are real tangible things that we've done but we always need to do more. We can't ever rest on our laurels. And so I wanted to focus on two things where I think the areas that are essential truly leaping forward. One is on foreign investment and the other one is on intellectual property but these are by no means the only areas where I think we can really work together. So on the investment side we think U.S. investment into India could double if India continues to liberalize its investment regime. And what that does is it allows U.S. companies to bring their comparative advantages and technology, expertise and capital to India which is gonna help India grow and create jobs. But one of the things that's really key is that all companies, Indian and U.S. involved in things like global manufacturing need transparency, predictability and legal certainty. And there's some sobering statistics out there which we know that Prime Minister Modi is working on. So India right now ranks near the bottom of the World Bank's ease of doing business index. In enforcement of contracts it's 186 out of 189. And it takes an average of four years to enforce a contract in India compared with only eight months in South Korea and the cost of that enforcement is four times higher. So these things serve as a disincentive to investment especially in infrastructure where you have the nature of infrastructure being something that has high capital cost and is for a long term so you have to have predictability and the ability to enforce your contracts. And in a fast moving world of technology where I come from four years is an absolute eon. And so that is also a real lag because goods and services in the global value chain are moving in this interlocking way in a lightning speed. So I think there's some policy things that should be examined and some of these things may have made sense at the time but I think there are things that we need to kind of crack open. One of them is when I traveled to India this January with Secretary Kerry we discussed with Prime Minister Modi and with the Indian Energy Minister the country's massive energy needs. So there's over 300 million people that are still without reliable electricity in India and if you think about that that's almost the same as the entire population of the US. So the Modi government recently announced an ambitious target of 175 gigawatts of renewable energy by 2022 and that's fantastic. We know that US renewable energy companies have significant expertise that they can bring in partnership with Indian companies but there's some obstacles in the way here. Solar energy investment is conditioned on using local India made content which can raise the price of the cost of the solar energy and can also disincentivize investment. Another example, investing in India's insurance industry that's critical for fundraising for infrastructure development is conditioned on having Indian management and control of a joint venture. So in order to reach its $10 trillion GDP goal another example India is gonna need to expand financial access to 90% of its population by 2035 and today it's only 35%. So that's a big leap that has to go forward but foreign banks are still restricted in their ownership and operation in the Indian market. So opening up that sector further could go a long way to meet some of these GDP goals and financial inclusion goals. Last example, India has world-class software engineers. We know that. United States has expertise in shipping, warehousing, logistics. Yet FDI in business to e-commerce is restricted, business to consumer e-commerce. And so that keeps both of us from actually using our comparative advantages to our full potential. My observation is that restrictive investment policies often arise from concerns that domestic companies can't compete with foreign ones. And yet the evidence totally belies this in the case of India. We know Indian companies have shown that they're world-class and they're strong and they don't really need government protection from outside competition. Just if you look at what's happened in the US, Indian-owned companies have invested over $11 billion in the US and they employ over 44,000 people here. And these companies have thrived in the US which is one of the most competitive markets in the world. So I think there's plenty of evidence that Indian companies are on that playing field with everyone else. One tool that we can use to help facilitate greater US investment in India is a high standard bilateral investment treaty. And that's why we're really trying to move forward with talks about whether we can make this happen. A high standard bit would create transparent rules for US investment. It would ensure that future rules don't discriminate against investors. It would give investors access to neutral international fora to resolve disputes. And it would also open up sectors that as I described have some issues in terms of being closed or semi-closed. The second area, in addition to needing room to configure your investment in a way that makes sense for your business, which is basically what I've been already talking about. The second piece is intellectual property. And the need to have a really strong intellectual property rights and enforcement, those things are absolutely key to being able to have an innovation economy and even for regular manufacturing. So one of the most striking things about this is that recent press articles have mentioned that innovative Indian companies are moving their IP to other countries like the United States and Singapore. And that includes some well-known Indian startups like Flipkart, Mintra, and Zipdial. All of these companies have moved their IP outside of India. There's two reasons for this, main reasons. First is, has to do with how IP is taxed. And if you tax it and you try to transfer your IP once you've been acquired, if you're a startup, then you have to pay a very, very high tax rate on the value of your IP. And for a tech company, your IP is like the major part of your value. And the other more fundamental reason and something that we've been hearing for a long time is that investors are concerned about the strength of the Indian laws and the uniformity of jurisprudence on copyrights, trademarks, and patent infringement. And so for companies that are looking to invest in research and development, this innovation that's so critical to leaping forward in sufficient IP laws and lax enforcement are a major impediment. And we know that this area where I talk about comparative advantage, obviously US companies are among the most advanced and innovative in the world along with Indian companies. And so we really foresee that US companies and Indian companies together can lead the pack in doing business and partnering together to bring new technologies and services to the burgeoning middle class in India that's gonna be the world's largest by 2030. So this is something that would not only help keep more of India's homegrown innovation where it belongs, which is in India, but would also help attract more innovation from the US and allow much more freedom to operate for everybody. We're talking about these issues. I don't wanna make you think it's all negative. In fact, we're working on this through this new high-level working group on intellectual property that we started. And so I think we're working together to find a path forward. But I wanted to give you some concrete meat to chew on in terms of how we can really take things forward. So in conclusion, we in the US are totally committed to India's continued and accelerated economic growth and prosperity. We welcome India's rise. We think this is great for the United States and great for India. We each have, as I said, very strong comparative advantages that only become stronger if we can put them together. And so we are looking forward to finding ways to do that, to your input on what are the best ways to do that. The United States and India have shared values. We have a shared commitment to democracy. Together, we're partners in upholding international rules-based order that secures and ensures global peace, security and prosperity. So we have a lot we can do together in our doing. And now we wanna seize this moment that we have and bring to fruition the unrealized potential that still exists between our economies for the betterment of the lives of both of our citizens. So we are very looking forward to your input, to continuing to work with you and to really making this relationship all that it can be. So thank you very much. That's terrific. Well, I think between Undersecretary Novelli and Assistant Secretary Kumar, we have an idea at least from our government's perspective in terms of what we consider the big threshold issues that could potentially unlock more trade and investment, but also a lot of the cooperative work that we've undertaken in recent months to I think bring more companies to the table to get more investment into the market to increase those trade relationships. So in a very unusual thing in conference history, we're running a little bit ahead right now. So we're gonna take a 15-minute break while we wait for the Secretary of Finance, Rajiv Marishi to show up. He's been in town for a couple of days already. I got to meet him for the first time. For those that haven't, he was the Chief Secretary for the State of Rajasthan before moving to the Federal Government. So please join back in the back for Veranda for coffee and we'll call everybody back in in about 15 minutes. Thank you. We 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 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 TN9 and Tarun Das, Kiran Pasrecha from the Ananta Aspen Center, Dr. John Hamry 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 into 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 physical federalism and physical 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. They're 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 has taken 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 tax. So there's some taxation powers which are devolved to the states. Notably, it's a same tax like tax on liquor and also tax on sale of goods. It's important that you 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 center 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 that you 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 country. They include custom duties, excise 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 this, 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 recommendations 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 or 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 state tax. The question now because of the constitutional scheme of things, you have to pay a tax to the central government due 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 excise 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 incidents, 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, 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 of 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'll take a year because the constitution amendment requires both houses to pass it and then ratification by half the states. It'll take time and then there has to be a law for GST that after enacted under the new constitutional provision it'll take time but we hope to have it in place as announced by Finance Minister Jaitley by the 1st of April 2016. These developments should make doing business in India a little more attractive and simpler and contribute to the ease of doing business in India. It'll also create difficulties in getting changes in incidence of taxation because instead of going to a state government and changing a tax rate or central tax rate by going to government of India as Finance Minister now it'll have to go through a process of consultation with all the states. So it'll also make therefore tax regime in India more predictable but it won't be so easy to change it. The second development that is taken 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 labor laws which Aisan carried out last year. So the reforms that Aisan has carried out in four laws, labor 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 Aisan. 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 center of the states that the government of India and those the amendments made by the Aisan. So Aisan now has, is perhaps the only state which now has much eased labor 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 labor law, compliance in Aisan 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 13th Finance Commissions had recommended that 30% between 29 and 32% that is a range of the net collections 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 13th Finance Commission, the last Finance Commission whose period ended on 31st March, 2015 had recommended transfer of 32% of the resources to the states. The 14th Finance Commission has recommended the transfer of 42% 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 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 you combine the two tax sources and see how much of the taxation resources now retained by the states is about 62%. 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 the recommendations of the 14th Finance Commission are actually a very important step in not only empowering the states, but also finally burning the ghost of that 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, et cetera, whatever the Planning Commission was supposed to do. Now, 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 is more difficult 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 Ejigushan 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'll link it to investment in investors. So what does this mean and imply? I have said broadly what GST can mean for investment. I've also said that labor laws, et cetera, can be eased by the state governments without 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 and the Ministry of 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'll largely deal with the Government of India. But once you've entered an investment because you have to build a factory or you have to run a factory or a business or some business you have to run within that, that business is situated 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 developments that have 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 easier to navigate. In my opinion, they are easier to navigate and easier to understand, easier 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, et cetera. 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 a point. It can ease your entry into India, but beyond that is the state government which has to, 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've gone 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's 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 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 on 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 inequality 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, in the current budget, Finance Minister Jatly 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 their 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 regulations so that companies that are in this room and companies in India are much more strongly incentive to invest and keep the investment in India? One of the remarks I made in my presentation to you was that GST should make tax regime more predictable insofar as indirect taxes are concerned. So that should cover it. Of course, the major worry still comes from direct taxes, which is tax on income. It comes from the recent imposition of math on certain FII's, et cetera. So we are, you 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 therefore it sort of put its, you know, footwear is, whether it's more words are because it actually didn't appeal the, for example, the Vodafone case in the Supreme Court. And it has financed, it's 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 tension 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 rather than later we'll 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 it in 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 I speak to you today, it's the last day of 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 D.C. and also work with pharma industry. In fact, also consulting for what WANI Foundation on MSME innovation for creation of social and economic value through entrepreneurship. So building on the tax question that was just asked 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 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 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, but I'm making the answer short. But basically for only taxation principle, whether it should be residence 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 also as for investment trusts and real estate trusts. So I'm 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 an honest effort has been unfortunate because they kept giving cow 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 real trick here is to get them back into the tax system so they're able to get tax credit on their purchases. And hopefully that will 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 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 laughed that much? So 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 that I think that makes up a government affairs conversation. So it is an important conversation to have when we talk about the environment. So Secretary Marishi, I really appreciate you coming and sharing those thoughts. So right now we're going to switch over to the skills panel. So if the panelists could please come and join me on stage and we'll continue on. But thank you again, Secretary. Great.