 So the Honorable Minister of Finance, Arun Jaitli, your Excellency Daniel Cabellon Duncan, Prime Minister of Côte d'Ivoire, your Excellency Quissy Amisa Arthur, Vice President of Ghana, esteemed co-chairs and distinguished guests. On behalf of the World Economic Forum, thank you very much for joining us here in New Delhi for the India Economic Summit this year. My name is Viraj Mehta and I am the Director Head of India for the Forum. It's a privilege to be holding this meeting that brings together a truly global multi-stakeholder community to engage with India's national 16th government. Under the theme, Redefining Public-Private Cooperation for a New Beginning, we have a very exciting program over the course of the summit. A total of 24 sessions, which have been greatly inspired by the government's vision for India's development domestically while positioning India on the regional and global stage. We look forward to your active engagement and contribution and sincerely hope that these conversations will help achieve our shared goals for equitable growth in India. I would also like to thank our long-standing partner, the Confederation of Indian Industry, for our collaboration, trust and friendship over the past 30 years, Mr. Ajay Sriram, President of CII and Mr. Chandrujeet Banerjee, the Director-General for continuing this valid partnership with great enthusiasm. I thank everybody again for being here and now I'd like to invite Dr. Chandrujeet Banerjee to come and welcome everybody please. Excellencies, ladies and gentlemen, on behalf of the Confederation of Indian Industry CII, let me welcome all of you to this very significant and important India Economic Summit in 2014, which is a joint effort by the World Economic Forum and CII. I said significant for two reasons, one, it is the 30, today is the 30th year that the World Economic Forum and CII has been engaged over the 30 years in doing this India Economic Summit and so we do feel that this is very important. Second is we have a new government just for five plus months and it's important, so it's happening at a time which is extremely important and critical and we have the honor and pleasure of welcoming Sri Arun Chetli, the Minister for Finance, the Minister for Defense, the Minister for Corporate Affairs and many more other hats that he wears to have him amongst us to do the honors of the opening plenary. We also must acknowledge the presence of Professor Klaus Schwab who has been a figure, he has been coming to India for the last 30 years in shaping this India Economic Summit so very significantly and from CII we would really like to acknowledge your great contribution in making this summit to the stature that it is. I'd also like to acknowledge the presence of the CII President, Mr. Rajay Sriram and other past presidents of CII who are actually seated here and who have over the last 30 years helped shape this very important relationship of CII with the forum and the Indian Industries Connect globally. The co-chairs of course especially welcome them to this very important function and they have been responsible for shaping the agenda for this India Economic Summit which is so very well aligned and closely aligned with that of the government's vision and the government's priorities which have been enunciated over the last five months plus be it in the area of Swachh Bharat, we see issues of manufacturing, we see issues of digital India, we see issues related to financial inclusion, all these themes cutting across the India Economic Summit over the last next one and a half days and I must say that this summit is really blessed with the presence of three heads of states and as was mentioned by Viraj and it's an honor to really have them, the President of Rwanda, the Vice President of Ghana and the Prime Minister of Kote Dewey welcome excellencies for being here and present. With that ladies and gentlemen once again a very very warm welcome to you and wish you that you have a good meeting over the next one and a half days and may I now invite Professor Klaus Schwab and the Honorable Minister to please grace the dais. Thank you. Thank you for the welcome. I have to say for me it's a very emotional moment because it's the 30th year of being present here in India. I was a believer in India's potential and future since many many years but now finally I think the promise which India presents becomes reality and your leadership, the Prime Minister's leadership and of course I have the great pleasure and honor that we start our session, our official opening today with the presence of the Honorable Arun Chetli, the Minister of Finance, Minister of Corporate Affairs and Minister of Defense. Now in preparing my discussions this morning I looked at all the reform processes you have undertaken and I in my modest way I only could list until now or I should say not only I was very impressed to list 19 different reform processes and I could ask you a question to each of those but let me start Minister, you yourself are you satisfied with the reform process as it has been undertaken until now. Thank you very much Professor for your invitation to the India Economic Summit and thank you very much C.I. I've been coming to the summit in the past but I've been too long in the opposition so we were always called for the closing session and I do recollect that last year I almost promised to be at the inauguration next time. Now there's a lot which has to be done. Now if you were to ask me are you satisfied, well I'm quite satisfied with the beginning that we've made. It's a long journey. Some people expect that the second generation of reforms in India really need one or two big bang ideas and that probably would be about all. Reforms is not about one sensational idea. You can damage the economy by one bad idea. Retrospective taxation was a bad idea which damaged the economy so even one such negative step can do an immense amount of damage but merely undoing that won't cure all our problems. So we began on a journey and I believe that the pit was reasonably deep and therefore rectifying it is going to take a lot of time. The challenges are there but one thing which we are bearing in mind that there are large number of steps required. You listed 19 of them I almost ran out of paper in the morning when I was noting them but at the same time one has to consistently pursue the reforms agenda and therefore one has to doggedly and surely move in one direction. There are bound to be some hurdles in obstructions. One need not get unnecessarily upset about them. There's a lot within the present political framework and the governance framework that can be done but one thing which has to be clearly borne in mind is that no step should be taken which sends a contrary signal and therefore with all kinds of ideas begin small one has to pursue one direction and that's what the present government is trying to do and I'm quite certain that it's only a matter of time when the ground results start reflecting on the cumulative effect of these steps. I think India which had fallen off the global radar in the last two to three years people have again started looking at us. There's a considerable amount of buzz about India. People are watching very carefully. They are now beginning to get convinced that India would be once again a place to invest in. Those within India who are now looking outside are probably reconsidering their decision and therefore I think the Indian system and that merely doesn't include the central government includes the state governments it includes all of us collectively because we are living in a country which is administered on the principle of cooperative federalism. We all collectively continue to pursue one positive direction and it's only then over the next few months in the initial years I think the effects within the country will also start. Minister when we look at all those reforms from a rational point of view I think say I'm good hands with the prime minister and you as the principle architect but usually when you have to reform whatever it is you have to take into account the mindset and the biggest hurdle is the mindset of the people and of course also in the case of India as I hear you the systemic failure very often caused by groaning corruption. What is your feeling about it? How can you change? I mean someone told me if you would do a poll among all the people working for the government you probably would have 10 percent very supportive 30 percent somewhere in between and 60 percent opposed. So how can you change this mindset and how can you create a corruption free society? Well I think those who administer India have first to change their mindset and if we change our mindset which we are attempting to the last five to six months every decision which we have consistently pursued has also been intended in the direction of eliminating any possible discretion. Now let's look at the areas where charges of chronic capitalism have come about in recent years allocation of natural resources. Now somehow we pursued a policy which actually did say that there is a huge element of discretion the government has. Once those discretion were misused and misused for collateral reasons you perhaps had those allegations of chronic capitalism some of them were actually true the spectrum allocation the coal block allocation and these became defining moments against India. They became defining moments and put a question mark on our entire intention to honestly pursue reforms in the economy. If there is freedom from control there has to be an element of fairness within the system which appeared to be lacking. Now look at the way we have taken some of our decisions the whole mess on the coal blocks we have almost surgically come out with a new law through an ordinance which was an emergency law in India which is very clearly three or four aspects. There are large number of state sector companies both at the center and the regions so they get the first allotment of coal blocks. The actual users get it by a process of e-option and thereafter if the government desires it will open it up for commercial mining. I can tell you with regard to other minerals we are about to undertake a similar reform the element of discretion in the hands of the state has almost disappeared and therefore once you take decisions of this kind and governments change their mindset, eliminate the possibility of any corruption collateral consideration or crony capitalism as you call it. Obviously there is going to be a much larger support for a reform of this kind and therefore investors also are certainly going to be looking for a system which is fair not a system on which they have to entirely depend on the larges of politicians and ministers. Just to follow up the issue of mines your government is very results oriented it's very impressive how you put the results into the center but can you go as far as to make every state employee in every village really evaluated on the basis of the results he delivers? Can you go into this direction and will you go into this direction? Will you repeat the question? Can you make sure that every government employee is evaluated on the basis of the results he is delivering? Well I think that can be the target but it's a very daunting target and therefore you have a system of governance which you can certainly improve can you shake it completely it's challenging and I think the manner in which the government has started particularly the prime minister I've seen his interactions with the top most civil servants of the country and therefore he's started calling them his team and therefore he knows almost each one of them by his first name he's given them the liberty of SMSing or emailing or telephoning him for almost any consultation or information that they require he's made himself accessible to each one of them for instance take this program of financial inclusion it's unusual that the prime minister sent a personal letter to every bank employee in the country as a result of which for financial inclusion where 42% of India was Indian population was outside the banking system and our target is to reach as close to the 100% mark in the very first round it appears that the initial indications are that we may exceed the targets of inclusion because the entire banking industry has actually got involved in the process of inclusion and I think we could attempt that but it's a very daunting task. You want minister you want to create a plain level field for competitiveness now this includes two aspects the first one is privatization to give private entrepreneurs more freeway and second of course also facilitating access of foreign investors playing a major role in the Indian industry and here some sectors come in mind like insurance and so on there are still limitations what is the long term policy which you envisage in this respect? A concerning privatization and B access of foreign investors. You see we followed a slightly different model a more liberal model when we were in government on the last occasion there after the entire model changed it's more a divestment model and some of the very important state sector companies the government holding is being gradually brought down but still retained as a majority because some of them are very strategic sectors where it is required to be currently kept because of security in those reasons in those sectors of the economy so for the present we are continuing that policy of divestment but certainly I would be open to look at some set of PSUs which could do much better in private hands there are still a large number of them which are almost on the verge of closure where people are going to lose employment so given a choice between their continuing in the present shape or getting privatized then the second option would be a preferable option currently they are being sustained merely on a governmental support now that's not a long term solution taxpayers can't continue to pay for loss making businesses as far as the access to foreign investors is concerned our policy is to look at each sector sectorally and we keep in mind the requirements of the Indian economy and the appetite of the Indian political system currently for reform in that sector for instance you gave the example of insurance now when we were in government of the last occasion we had opened up the insurance sector at that time probably the political system had appetite for that limited opening up we are now liberalizing it a little more and I do hope that the amended bill would be passed in the forthcoming session of parliament later this month Minister you just mentioned you look at this issue keeping in mind I quote you requirements of the Indian economy could you elaborate to a certain extent what do you feel I mean in terms of foreign access how would you define the requirements of the Indian economy you see A you see for any please bear in mind that there is a difference between reforms in a developed society because people in developed societies have already tasted the fruits of development and therefore in a country where you have 30% of the people living below the poverty line in a country where you have a very large number of people at their sustenance level for governments to market reforms to them is far more challenging and therefore it's the responsibility of the government and the political system to be able to carry parliament to be able to carry your own political parties to be able to carry a large section of the public opinion with you so your deformed process cannot be one which simply confronts public opinion or the sectors where you find a certain amount of or a huge amount of reluctance or reservation those doubts have to be cleared that debate continuously has to go on and therefore you have to then weigh the requirements of each sector there may be sectors where you open up for foreign investment but you would like to keep domestic equity at a certain level for instance I have recently opened up the defense sector now the defense sector was always considered very sacrosanct in India as a result of which we only became buyers and therefore it took a considerable amount of debate when last time we were in government we had opened it up to the extent of 26% now this time the previous government had partly a view I say partly because some in the previous government also wanted to open up but some had a view that this 26% foreign equity is enough and therefore there was resistance to even making it 49% they couldn't make it even though they had seriously discussed it so one of my first decisions was to make it 49% and then it was accompanied by a great debate that how it helps the interests of Indian society and by and large I thought it's been welcome and I can almost see the first ripple effects of this almost beginning to happen I do hope that India will and the private sector in India now along with their joint venture partners would get into a manufacturing of the defense equipment in India in a reasonably big manner that's the initial indication Minister one of the other obstacles which is always mentioned is the infrastructure and infrastructure development and when we I will ask you a later question about international trade but some people would say India has to address the issue of its internal trade which is blocked by lack of infrastructure now there is a discussion also going on in the G20 how to finance long term infrastructure projects in India needs a big effort in this respect how do you want to undertake it and how do you want to finance it well in infrastructure let me tell you we welcome large investment participation even international participation and that is one area on which there is a much broader consensus in India of late there have been financing issues and there have been financing issues even in sectors which were earlier doing well for instance our national highways program our ports program which had been going on quite well I think of late I have seen some financing issues we are dealing with our own domestic financial sector the banking sector and trying to resolve some of the issues so that the financing of infrastructure can begin in a big way but even international participation in this sector is something which we completely welcome and for instance our railways was almost close to private sector investment let alone foreign investment we have already taken our decision to open up our railways at least some parts of our railways for that investment and if the initial experiments do succeed it will probably enable us to open a lot more in real estate and we need housing in a big way almost 60 to 65% of the people in India don't have a home or a regular proper home some have homes in their villages and therefore we need urbanization in a big way we need suburbanization in a big way this process had started now the last government has left some hurdles behind and this is again another sector which we have opened up foreign investment because this is where capital has to come in large numbers earlier investment because of the restrictive norms was confined only to the major metros we have now liberalized those norms so that we can reach the tier 2, tier 3 cities also No Minister I would commend you on all those actions because what I see in the international community India is now at the top of the I would say attention list of the investors community so to make sure that those since interest is as fast as possible translated into action I think requires the necessary frameworks and here I just would like to refer to what you said at the very beginning you have to undo certain laws and one of those laws as far as I understand is the land how do you call it land acquisition law and I know as many aspects like you are not allowed to open private schools private hospitals and so on what importance do you give to this land acquisition law well that's one of the more difficult areas you see first let me tell you there's something at least one good aspect of that law also and that one good aspect of the law is that a lot of land owning farmers in India and these were subsistence farmers when their land is acquired and they got a one time compensation by and large even by Indian standards the compensations were inadequate and therefore this law flagged an issue of increasing quantum of compensation it also flagged the issue of long term relief and rehabilitation of those people I have absolutely no quarrel with that part of the law and I think that part of the law must remain the one which poses a difficult challenge is that procedurally the law lays down a very complicated procedure for acquisition of land now conceptually acquisition of land was always a sovereign power it was a sovereign right or eminent domain as they called it because in any society from building a defense containment or an installation to building a school to building a highway to building a graveyard for anything you needed land and therefore if acquisition of land was made complicated almost impossible then the growth process itself gets stalled and this law has made it extremely complicated now the previous government thought that perhaps this law because it made it very complicated with a section of the population would be extremely popular and it could be a vote fetching device now that doesn't seem to have happened now that conclusion has been established I think time has come at least at the second part of this law to have a relook and there are areas once you get functioning I today in the newspapers read a statement of one of the state government ministers belonging to the congress party in one of the states who said the difficulties they are facing I can tell you as the defense minister I am facing a difficulty every day where even defense and national security is not an exempted purpose so you have to go through for a regular acquisition that complicated process today rural infrastructure urban infrastructure industrial corridors industrial parks affordable housing housing for the poor now even for these purposes for which land is required and these are essential purposes you don't get land and then there are some illogical provisions like the one you mentioned that land cannot be used or required under this law for private educational institutions or private hospitals so if Andhra Pradesh is today going to set up a new capital he'll have to first make sure in the land it acquires that there is no school or hospital in it because the moment they did it I think the gentleman who drafted this must be asked to explain the rationale behind the provision of this kind so if we are planning to set up 100 smart cities they have to be without a private hospital or a private school or a private university or even a hotel because it says it bars three purposes private educational institutions private hospitals and hotels so there are some factors in it which I think certainly require a relook minister I would like to ask you a more international question India accounts for 23% of global population but only 2% of global trade now India should have a special interest in facilitating global trade relations now coming from Geneva and looking at the WTO negotiations India is put on the accused of being a stumbling block as you know and one of the parts in the present negotiation is trade facilitation and we the forum published a report and I think you were on 93rd country in terms of trade facilitation would you express your own opinion how can India, what is the reason which helps India back to come India is certainly not opposed to trade facilitation let me make it clear now even if there was no WTO for our own reasons we would be facilitating trade and having therefore the best infrastructure for that now our trade facilitation commitment is not because of any multilateral arrangement at the WTO it's a commitment as a developing economy which we owe to ourselves and therefore we are going to have trade facilitation now India's position on trade facilitation has been completely misunderstood because of an unreasonable positioning by some of the developed countries and that unreasonable positioning is the following as a part of the Bali arrangement what is sought to be pushed through is trade facilitation one and two a permanent solution being found to stock holdings in agriculture and food grain now India has a very large food procurement program where a state agency procures food from the farmers today's newspaper headlines tell us how the international prices have fallen and if food grain prices collapse and India is not able to subsidize its farmers to that extent now most of the subsidies as far as the United States and the European Union are concerned from the amber box and the blue box have moved to the green box now the quantum has increased it hasn't come down now obviously therefore the state has to buy the food grain from the farmers and that food grain as a part of our food program we have a legislative support to that food program is now distributed to poor people in India that's our food program now there is sought to be a permanent arrangement on restricting the extent of food stock holdings which if it is reduced would result in Indian government not being able to buy from its own farmers and food grain from elsewhere coming in increasing the number of suicides which are farmers in India are being compelled because of indebtedness to commit therefore Indian state Indian government owes it to its farmers to protect their interests now we are negotiating the food stock holdings arrangement which is sought to be calculated on the prices of 1987, 86, 87 which itself appears to be unreasonable but then the controversy is only about one clause and that one clause is we agree to trade facilitation the arrangement on food stock holdings is arrived at it may take a much longer time to arrive at that arrangement but the peace clause and the impact of the peace clause in simple languages that if India doesn't restrict its food stock holdings it will be taken to the dispute mechanism at the WTO the peace clause would vanish in four years now all that we have requested is the settlement of the dispute with regard to the food stock holding and the peace clause must continue to coexist therefore till you resolve that issue India should not be taken to the dispute mechanism the peace clause must coexist so the dispute is not with regard to trade facilitation trade facilitation has become a mere victim because of its unreasonable posturing by some countries that your peace clause will disappear in four years but the decision on the food stock holding can take place indefinitely when I have discussed it with representatives of very large economies they were in fact surprised that India's position appears to be very reasonable because we agree immediately to trade facilitation please agree to the peace clause coexisting with the settlement of the dispute that's all but this is being positioned as some kind of an ideological opposition to trade facilitation which there is none so even if there was no WTO we probably would be doing trade facilitation within India we are agreeing to a multilateral arrangement on trade facilitation but please keep the peace clause alive till the dispute is settled with regard to the stock holdings issue that's all thank you I think it's very young it can be very well understood I hope that you take our report of trade facilitation which lists all the different issues as a kind of benchmarking to improve in the future but remaining to a similar issue the whole subsidies question I think it's about 2% of GDP which the government spends for subsidies what is your feeling can you reduce subsidies well we are already in the process of rationalizing them for instance petrol is already linked to the prices of the crude we've taken a decision 2 weeks ago linking diesel to the market price I've already appointed as part of my budget announcements the expenditure management commission the expenditure management commission may give some interim recommendations and rationalization of subsidies is one of the important items that they have to suggest and I'm quite certain that they will come out with some important suggestions to that effect do I see subsidies in India being eliminated the answer is no because there is a section of people which will still require element of support as far as food is concerned and so on but do I see it as being rationalized I certainly do Minister we have to come to an end of our discussion but I have two final questions one is of an economic nature and I know many of our members would ask this question how can you reform the labor law to facilitate particularly the employment of young people now you have to boost the manufacturing sector what are your plans in this respect see let me tell you today is one of today the newspapers today carries a comment from me that reforms are an art of the possible you don't take up the more difficult reform in the first instance and then keep campaigning that I am not being allowed to do it therefore there are a hundred things which are possible in India today as a part of the reform process some aspects of the labor law in India can certainly be improved and rationalized in fact the initial three amendments and I will simply say they are not very radical changes are something which we have already discussed some of them may be introduced in parliament are due for discussion in parliament in one of the forthcoming sessions and this is an area where we will have to have much larger consideration even with people working in that sector and currently I think it is about time that process started but will that happen immediately I am unable to say that as far as the passage is concerned because some people will certainly have reservations on that issue will I be able to immediately get it passed in parliament I am not in a position to comment I see merit in your suggestion but then there are many others within the political system who still don't see merit in that suggestion itself so we have to convince all of them that perhaps a more flexible policy will create more jobs and is more labor friendly but that is a process in which I think a much larger debate in India is required but you foresee this process taking place and hopefully coming to a positive end still during this legislature no this requires a legislative change and therefore we have to prepare our legislature for a change of this kind but still in the coming under the present government in the next elections let's put it in no I am unable to bind myself to any time but there are changes which are more reasonably plausible as I said three of those changes our government has already decided the cabinet has passed them some of them are already before the parliament and they are being discussed so last question minister I asked you in your capacity as minister of defence I think the world welcomed the opening up of relations with Pakistan now there have been some incidents lately you made some comments how do you see the evolution of your relationship with your closest neighbour if I may say so or most important neighbour Pakistan well it's a very important question that you asked the answer to that really it depends on how Pakistan chooses to answer that question you see the present government sent a clear signal in the first instance that we were willing to speak to Pakistan you are willing to normalise the relationship with Pakistan we invited the head of government Prime Minister Nawaz Sharif to India at the swearing in of the government itself which was a very important signal the two prime ministers met they discussed it's never the government of India stand that we are not going to speak to Pakistan but at what level you speak and when do you speak the environment for that dialogue and the level at which the dialogue takes place has to be entirely set by Pakistan but then there are a few red lines so we invite them we create the environment we then fix up a dialogue at the level of the foreign secretaries our foreign secretary is to visit Pakistan literally a few hours before that they invite the separatists for the dialogue to their high commission so I think a new red line had to be drawn in Pakistan to reconsider this question that who do they want to speak to they want to speak to the government of India or do they want to speak to those who want to break India so unless Pakistan makes that conscious choice a meaningful dialogue with Pakistan would not be possible and then came the third stage where hostilities are mounted at the international border and the line of control now traditionally when such hostilities are mounted we've been defending ourselves but we did consider and that's the statement I made that Pakistan also must realize that this kind of a misadventure where you fire on civilian population start killing civilian population uproot Indian villages at the line of control or the international border probably the consequences of all this would be an unaffordable cost for Pakistan and therefore each one of our three actions so far has a message the first is we want to talk so we invited them the second is we send our foreign secretary there but then you must decide whether to speak to our foreign secretary or to speak to those who want to break India and the third is the condition of the Indian international border can't go on there's a daily tension that's not an environment for a dialogue and therefore India would like to normalize the relationship but whether Pakistan wants to normalize the relationship it depends on Pakistan now I can quite understand Pakistan's problem is who decides these things in Pakistan the civilian government or somebody else Minister I think this session I'm which in half an hour you answered you gave a precise answer to so many questions I think it just shows the new tone and the new mode of the government of the country it's based on efficiency it's based on a comprehensive policy you I quote you you said the reforms are the art of the possible but behind let's say you have a vision for the long term and I would conclude this session just by asking you a very final question if you had one message particularly to the foreign CEOs who are sitting in the room or I may subdivide the question if you had one message for the foreign CEOs in the room what would it be and if you have one message for the Indian CEOs who are in the room what would it be message or request I should say request well I have one message for both of them we are waiting for you and I think we should we should go through the open door let's conclude the session in spirit I know Minister probably we can count on your presence in Davos next year I'm sure you will have an opportunity to talk about further progress and for all your reform attempts we wish you and the Prime Minister good luck and some necessary support thank you