Dinner presentation to the Asia Society Hong Kong Center

"Resurgent India - Vision and Agenda for Growth"

by The Hon. Yashwant Sinha
Finance Minister for India

Hong Kong, May 15, 2001

IRONNIE CHAN: Ladies and gentlemen, let's get started. First of all, I want to welcome Minister Sinha, Finance Minister of India. We are very, very honored and delighted to have you with us. It's not every day that we have a leading cabinet member from such an important country in the world in our midst.

Allow me to begin with a story. Many years ago I was travelling in Mongolia one day and over breakfast a friend of mine, who was a travel mate of mine - whom by the way, Minister Sinha, you know - was delighted, he was blooming, he was just glowing, and he said, "My party just won the National Election in India." He was considering whether he should fly back to Delhi right away, and that is Verin Shah, who is now Governor based in Calcutta.

Anyway, Verin decided not to go back. It turned out that that government lasted something like 13 days. But later the party came back and is now in power and has been so for several years.

I must admit, Minister Sinha, I did not know much about BJP until Verin told me about it and I looked into it. I must admit also, coming from Hong Kong, being a totally capitalistic place, I was a little worried about some of the policies that your party has had in the past. But in the last couple of years I've had the great pleasure of meeting a number of the leaders including your Prime Minister and including Minister Sinha. Two and a half years ago I had the great pleasure while in Davos to attend a very small meeting in which Minister Sinha was the speaker.

I must say that my worry for India over the last couple of years has subsided considerably. My worry for the BJP party has certainly also changed. The result is that, Minister Sinha, you would be happy to know, although in very small sums, I started to invest in your country.

Of course, now I have another worry, Mr Minister, that is I understand that the other party that starts with a "C", whatever it is, is now a little bit anti-reform which worries me. If so, then let's hope that BJP will stay in power for a long, long time to come.

I have a lot of intellectual interest in your country. I have had debates publicly and privately in your country. Indeed, I have been the target of newspaper articles saying that 'this guy preaches heresy in India'. So be it, but nonetheless with all that you and your government has done of late, I think the future of your vast country may indeed be bright.

Having looked over the budget that you presented to your Parliament recently, I must say that my confidence in investing in India has only heightened, that this investment or - many Indian students like this term - privatization, which the Minister used liberally just now over dinner, gives me even more confidence. The tax reform, the labor reform, all the deregulations that you're proposing, recognizing that you have some difficulty maybe at the Parliament, but nonetheless I'm trusting that you will be able to push it through.

Allow me, before calling on the Minister, one last story. Sorry, I have a lot of stories tonight. Many, many years ago I was in New Zealand, a country that I invested in quite heavily in the last decade or so, and I was having dinner with Don Brash, who has also spoken to the Asia Society and who is the Chairman of the Reserve Bank of New Zealand, and over dinner he said, "Ronnie, look at that lady who just walked in." I said, "Oh, okay, who is she?" Well, she has a bodyguard, and the reason is because she was the then Labour Minister of New Zealand who later became the Prime Minister, Jenny Shipley. She had been working on labour reform, and she was a Labour Minister at the time, so much so that she needed a bodyguard.

I see that, Mr Minister, you still don't have a body guard, at least not in Hong Kong. But I trust that you'll be successful just as Jenny Shipley has been in her little country, and you have a big country, and maybe, you never know, Jenny's pathway led her to become the Prime Minister. We don't know what is the future of guest of honor today, but nonetheless, ladies and gentlemen, welcome Minister Sinha.

MINISTER SINHA: Thank you, Ronnie. You began with a few stories - let me follow you.

Three years ago, when I took over as Finance Minister of India once again, one of the first outings that I made outside India was to Washington to attend the meetings of the International Monetary Fund and the World Bank. Some well-wishers like Ronnie Chan here, decided that I should, since I was the first representative of a BJP led government to go outside the country, I should have a meeting with the investors in the US. So we had meetings in New York, we had meetings in Washington, and in the course of those meetings I noticed that people were looking at me with a curiosity which was somewhat unusual. I tried to find out what the reason was. Then I was told that they were trying to find out whether I was a normal human being or not, belonging as I did to a party which is still described in the Western media - and I'm sorry, even in the Hong Kong media - as a Hindu nationalist party. So I had to ultimately tell them that, 'Look, I have two hands like you have, I have two legs like you have. I have a human face and I'm a human being, and I have not come out of any cave. We are regular guys and you can do business with us.'

That was the kind of - what shall I say - apprehension, with which we were viewed in the beginning. Therefore, it flatters me, when I read, as you might have just done, a journal like The Economist says that we are not merely apologists of reforms, but we are champions of economic reforms.

Which brings me to the other story, if you don't mind, Ronnie. When I presented my first budget in 1998, it was not well received like the latest budget has indeed been. Then one Indian newspaper wrote that I was the second-most disastrous finance minister that India ever had had. That made me very curious because I was wondering as to who was the first disastrous finance minister. So when I met this gentleman later at some function, I went up to him and I said, "You made this remark about me. I would like to know from you who was the first most disastrous finance minister of India?" He looked at me and he said, "You yourself in your first tenure."

We have come a long way since then and I am happy I am having this opportunity this evening to be able to talk to such a distinguished gathering as today's about India and about the world. I am grateful to the Hong Kong Center of the Asia Society, to Ronnie and his colleagues, for having extended this invitation to me, and for having given me this opportunity to be able to interact with all of you.

A few weeks ago India put in space a GSLV, as we call it, the Geosynchronous Satellite Launch Vehicle. We have a few in space but they have been launched from other launching centers. This was the first time that it was launched from a site in India by Indian scientists, through a purely Indian effort. We failed the first time, there were some technical problems. The second time a few weeks later we were able to put it successfully into orbit.

With this achievement India has joined a very exclusive club of, I think, six or seven countries in the world, which have the capability of putting a satellite in orbit for communication purposes.

The talent and the prowess of India in the field of information technology, is something which is well known, and I don't have to take your time in describing it to you. We are very good in the field of biotechnology. We take less time and spend less money in discovering molecules. We produce some of the cheapest medicines in the world. Our research base is very considerable and very strong, as indeed it is also in the field of fundamental research.

All this has not happened suddenly. I've always said perhaps the world was watching India, looking at a damn which was blocking some river, the water was accumulating gradually until some day suddenly we found that the reservoir was full. Many decades ago the leaders of India decided to take India into the area of science and technology. They decided that this is where India's strength must lie and therefore we set up institutes of learning which turned out to be institutes of excellence, and suddenly, when this Diaspora took place, the people went out, the world recognized that Indians had talent.

I have some figures here - I will not vouch for them - but this was something which I mentioned in the meeting of the Plenary Session of Davos. I came across this on the internet. Some of it might be marginally wrong but I think by and large the direction will be right. This said, out of the couple of millions of Indians who live in the US, and we are all known in the US as people having professional strength:

• 38 per cent of all the doctors in the US are Indians;
  
  
• 12 per cent of the scientists in the US are Indians;
  
  
• some 30-odd per cent of the NASA employees are Indians;
  
  
• 34 per cent of the Microsoft employees are Indians;
  
  
• 28 per cent of IBM employees are Indians

In Hong Kong here I've come across in the day, 24 hours, that I have spent in this trip, a large number of Indian professionals who are working in various capacities in this confluence of cultures that is Hong Kong. Yet, India is a developing country. Yet, we have problems of poverty that we have to solve.

We have to integrate ourselves with the rest of the world which we had shunned for a long time, and now we are trying to come to terms with that reality which is outside of India.

We have problems, no doubt. We have challenges, but let me tell you, ladies and gentlemen, we also have a vision, we also have a plan of action -

• a vision to make India strong economically - a plan of action which will improve the quality of life of our people
  
  
• a vision which will see India occupy its rightful place in the community of nations - a plan of action which will ensure that we are able to deal with the rest of world on terms which are equal and honorable.

If you look at the long history of India, centuries of history that we have had, you will find that when we had the power and the strength we did not use that power and that strength to subjugate other nations. We went out to them with a message of religion; we went out to them with the message of friendship; we went out to them with the message of Indian civilization.

So there's something different in India which will, let me assure you, never make the strength of India a threat to anybody. That strength that we are developing, and we shall continue to develop is a strength that we propose to use for ensuring peace and tranquillity in our neighborhood, to ensure peace and tranquillity in the rest of the world.

Economics naturally will play a very, very important role in this whole saga of development that we are trying to unfold. When I presented the budget this year I talked about a six-point strategy to encompass, to reduce into concrete terms, this vision that we have. These six parts of the strategy were, if I could take your time in repeating them -

(1) speeding up of agricultural sector reforms and better management of the full economy

(2) intensification of infrastructure investment, continued reform in the financial sector and capital markets, deepening of structural reforms through removal of remaining tiresome controls constraining economic activity

(3) human development through better educational opportunities and programs of social security

(4) stringent expenditure control of non-productive expenditure, rationalization of subsidies, and improvement in the quality of government expenditure

(5) acceleration of the privatization process and restructuring of public enterprises, and

(6) revenue enhancement through widening of the tax base and administration of a fair and equitable tax regime.

This is the strategy that I have set out for the current year and beyond for taking India into the goal that we have set for ourselves. The rest of the budget speech deals with concrete action programs of how this can be achieved.

There is a lot that we have to do domestically, there is a lot that we have to do to improve the external environment. There is a lot which the global community has to do in order to make it fair and equitable to developing countries like India.

Therefore, while we are willing and ready to do our part, we will look forward to the continued co-operation of our friends in places like Hong Kong, non-resident Indians, Indians who have lived in Hong Kong for many years, many decades, to make their contribution to the progress and well-being of India. We look forward to the continued and enhanced co-operation of our friends in Hong Kong generally for their contribution to this effort which India is making.

When we were sitting having dinner at that table, at one point of time Ronnie told me, "Please don't mind, Mr Minister, because we are talking about money" - and I told him I had been forewarned when I came to Hong Kong that people will talk about money here, and I'd like to hasten to add that when I am inviting you to come to India to do business, it is not for the love of India necessarily or entirely, it is not to persuade you to lose your hard-earned money by investing in India. It is to come to India in order to multiply your gains. And let me tell you that many recent studies, at least two that I am aware of, have shown that foreign investors have made more profits in India than they have perhaps in any other destination, a fact which is little known.

No foreign investor has lost money in India. At the height of the East Asian crisis - because we are often told that the monies invested by the foreign institutional investors in their stock markets is very fluid, very hot money - at the height of the East Asian crisis, out of about US$9 billion which was invested in the Indian Stock Markets by the FIIs, the total withdrawal was only about $600 million. In the subsequent years, 1999, 2000 and now 2001, they have gone on to add something like $4 billion more to this figure of $9 billion.

We were able to weather the storm which broke out in our neighborhood because we had been cautious. And therefore, while caution is not prescription for inaction, I strongly plead with you that in the world of today where there are no safeguards. I should know because since 1998 I am attending the meetings of the International Monetary Fund where we are grappling with the problem of creating these safeguards through the new international financial architecture. It is each country for itself when it comes to the crunch.

It is often believed that India was saved from that crisis because we don't have full convertibility or capital account convertibility. It's not true. Let me tell you, each dollar which was invested in the stock market was liable to be taken out of the country and there was no legislation, there was no rule which could have prevented us from telling the FIIs 'you can't take money out of this country'. If they still stayed, and I'm not talking of foreign direct investment, mind you, I'm talking of investments in the stock market - if they still stayed it is a sign of their confidence in the Indian system, in the Indian economy, and not because they could not take their money out.

India is one country which throughout its independent existence from 1947 till date has never reneged on any of its international obligations. Never have we ever told a foreign party, agency or government to whom we might have owed money, 'sorry we are not in a position to pay you'. Whatever it is taken for us to do, we have made sure that these obligations are treated as sacrosanct and they are honored, and we have honored them. I should know because I was the Finance Minister at the height of the balance of payment crisis that we experienced in 1991 in the wake of the Gulf War.

So, ladies and gentlemen, the point I'm making is we are today a nation on the move. We have taken a number of very important decisions in the decade of the 90s, and especially towards the end of the 90s, to make India an open economy. The last of the quantitative restrictions on imports were lifted on 1 April this year under arrangements of the WTO. Now India is a country where everything is freely importable.

It is creating its problems. Our industry, our agriculture, our services, have to get used to this competition on Indian soil and they are trying to adjust. There is pain in this process and that pain will be expressed in some way or the other. But the message of the government constantly is to Indian industry, to Indian agriculture, please readjust, please restructure, please cut your costs, please become competitive. We know they have problems and we as government are trying to solve those problems.

Similarly, for instance, we have been liberalizing our foreign direct investment regime and the latest is - today is Tuesday, is it - exactly a week ago the Indian Cabinet met last Tuesday and we took a decision to further liberalize the foreign direct investment regime

• drugs and pharmaceuticals - 100 per cent foreign direct investment through the automatic route,
  
  
• civil aviation - 100 per cent in airports, and as you might be aware, we are privatizing our airlines, both national and international,
  
  
• urban infrastructure - 100 foreign investment through the automatic route for setting whole townships,
  
  
• hotels and tourism - 100 per cent foreign investment through the automatic route,
  
  
• mass rapid transit systems in large cities, especially the metros - 100 per cent foreign direct investment through the automatic route,
  
  
• telecommunications, where we have a limit of up to 49 per cent in cellular and basic, we have said up to 74 per cent for internet service providers with gateways, radio paging and end-to-end bandwidth,
  
  
• banking, where it was 20 per cent, it has now been raised to 49 per cent,
  
  
• more importantly, we have opened defence production to the private sector. It was entirely a preserve of government and we have decided to allow 26 per cent foreign direct investment as equity even in defence production units.

So, as I mentioned to you, whether it is trade or it is investment, we are trying to open up the country, we are trying to come to terms with the rest of the world. But what about the rest of the world? Is the rest of the world being equally fair? I'm not referring to Hong Kong, I'm referring to the role and the attitude of what is generally described as the so-called developed countries. They're not being fair.

If you look at the arrangements that they have made when the WTO treaty was signed, you'll find that whatever was of interest to us as a developing country was all back-loaded and what was of interest to them was all front-loaded. So while we have been compelled to open our country for their goods, their countries are not yet open fully for our goods. Textiles, where we have a great deal of interest, this is still something which is subject to quota restrictions in the developed countries and we are hoping that they will be able to keep their promises when we come to 2003, 2004 and 2005, by when they are supposed to open it.

Similarly, in agriculture you will be surprised to know that a paradigm shift has taken place in agriculture in India. From being a food-shortage country, today we are sitting on something like 45 million tonnes of wheat and rice, and we are looking for markets abroad to be able to export it. But as somebody told me recently, the developed countries are spending annually something like $365 billion to support their agriculture. Therefore, agricultural trade is subject to all kinds of restrictions and it's very difficult for countries like India to be competitive in this area. Therefore, we have a great deal of interest in the agricultural debate which is going on as far as the next round is concerned.

But when I come to the next round let me tell you that once again we notice that the developed countries are trying to force issues and considerations which are of no relevance to trade - issues like labor, issues like environment which are nothing but new non-tariff barriers on the exports of developing countries.

When we talk in terms of free flow of capital we talk in terms of free flow of technology across national boundaries, we don't at the same time talk of free flow of physical bodies across national boundaries. There we build various barriers and there is cherry picking which is going on. The cherry pickers pick up the best and the brightest from the developing countries who in turn go and create capacities in their countries, but ultimately, beyond a certain point, it becomes a national loss to the developing countries. But they will not open their borders, their countries, for semi-skilled people to move from the developing countries to those countries even if they need them.

The international organizations are not democratic. The UN General Assembly has universal membership but the UN Security Council does not have any some pretensions. The World Bank and the IMF have disproportionate voting rights for the developed countries and when it comes to heading those organizations, then it always must be a European who will head the IMF and an American who will head the World Bank.

Democratization of the international organizations therefore is a very important item on our agenda because we really want these bodies to function along democratic lines because the objectives have undergone considerable change.

Finally, it is not charity that we are looking for. As far as India is concerned, as far as, by and large, all the so-called middle income countries are concerned, we are looking for equitable and equal opportunity. And let me assure you that if the global community were to take a more liberal view of these issues, and they were to open for trade, for economic exchanges, their countries in the same manner in which they are expecting us to open our countries, then we have nothing to fear, nothing to worry about.

Yes, most certainly in the case of the low-income countries, we need to build capacities because equal opportunity will still not enable them to take advantage of those opportunities. So when we look at the heavily indebted poor countries, a very large number of them are in Africa, in Latin America, in small island states, in landlocked countries -- they need some special treatment by way of assistance to enable them to build capacities. If we help them with capacities, then we enable them to compete freely in, as I said, an equitable trading atmosphere.

This is our vision of the world, a world which, as I said, learns to treat all the rest of the countries in a cordial spirit, a world where each country approaches the other in a spirit of goodwill and friendship, a world where no single superpower will dominate or make it rigged run, where it will be the WTO which will decide what is fair and what is not fair and not super-301, not any domestic legislation, a world where irrespective of size the dignity, the honor of that country shall be fully protected.

This is the world view that India has. As far as India itself is concerned, let me tell you we have had a survey recently and we have found that in the last five years from 1994 till 1999, 2000, we have been able to reduce the percent of people who are compelled to live below poverty line from something like 36 per cent to 27 per cent. And when we are talking of this upgradation, for a country like India, a billion people, it means that something like 70-80 million people have been lifted above the poverty line.

We have a vision that by achieving a higher rate of growth, by directly attacking the problems of poverty, deprivation and disease, it should be possible for India to eliminate completely the problem of poverty by the year 2010. The world's target is to reduce by half the number of poor in the world by 2015. If India is able to achieve this target, we would have made a very substantial contribution to the international community's goal of reducing the number of poor in the world by 2015, poor people who are compelled to live on less than US$1 a day.
I told the Fund and the Bank and I chaired the Development Committee, which is the Ministerial Committee of the World Bank, and I told the ECOSOC meeting at the UN that we must be able to concentrate the global community's attention on Africa, where there is not only poverty and deprivation, but there is disease, HIV and AIDS of horrifying proportions, and I'm glad to be telling you that the global community is putting its heads together in order to be able to find cheap, affordable medicines for communicable diseases including malaria and tuberculosis, and of course HIV and AIDS.

Let me assure you, ladies and gentlemen, that while we shall continue to make progress in India to achieve our cherished goals, India shall not lag behind in pulling its weight in the global community to ensure that the world is a better place to live in the 21st century than it has been in the century which has just gone by.

Thank you very much.

RONNIE CHAN: Thank you, Mr Minister. The Minister has been kind to answer a few questions. Let me first say this, Mr Minister, I am extremely confident tonight when I hear you say that no foreign investor has lost money in India. I happen to be a board member of a company called Enron, which is probably one of the biggest investors in India - we haven't lost money.

MINISTER SINHA: Or about to lose money.

RONNIE CHAN: We are about to and I'm very confident, Mr Minister, that I can now write to the chairman tonight and say maybe he has a chance. Anyway, ladies and gentlemen, the floor is open. Who will ask the first question? At the back there and then Robert Lee in the center table.

QUESTION: Minister, thank you for sharing your vision with us. It was a very heart-warming speech and it gives us all confidence. But I'm a little disappointed that you didn't mention the one thing that most often comes in the way of India's achieving its economic destiny, if you like, and that's corruption. Corruption is what makes people reluctant to invest in India, not just foreigners but Indians. Corruption is what prevents Indian companies from being efficient and of course it impinges on the lives of ordinary Indians in terrible ways. So my question is this: could you tell us specifically what your government is doing to fight corruption and, if you can, what specific successes you've had?

MINISTER SINHA: There are two ways in which we are trying to deal with this problem. One is to find out the guilty, identify them and punish them and you might perhaps be aware that recently we caught the Chief of the Board of Customs in India, the top man, for corruption. He's in jail.

As far as corruption at the political level is concerned, all Members of Parliament, all Members of State Legislature, and of course all Ministers, whether in the provinces or at the center, are within the definition of "public servants" and therefore they are subject to the same laws which apply to a government servant.

We have introduced legislation in the last Parliament where after considerable debate we have decided to include even the Prime Minister within the jurisdiction of this particular authority.

There was a development recently which has highlighted the issue of corruption in Indian society. That was the spy camera of a certain dot.com company. But we have responded to the allegations contained there by instituting a judicial enquiry into the whole thing by a retired Supreme Court of India Judge, and the political personalities who came within the shadow of doubt have resigned. There were no direct allegations against the Defence Minister of India but even he has resigned, and he is subjecting himself to the enquiry that is being conducted by the Supreme Court Judge.

So we are determined to fight the problem of corruption. I would not say that we don't have that problem. I would only say that it is a problem which is not peculiar to India, it's a problem that we encounter in many other societies. They are dealing with it in their own way, we are dealing with it in our own way.

QUESTION: I understand also, Mr Minister, that recently there were some people relating to the Securities Exchange Board of India that also were arrested and I suppose that is a good sign for many foreign investors that you really mean business.

MINISTER SINHA: That's right. I'm glad that you pointed this out. I did not refer to the goings on in the stock market because it's not the government or government servants, public servants, who are involved there. It is the private players who are involved there and therefore when we are talking of corruption I think we'll have to talk of the entire national life and the emphasis therefore that we are putting on corporate governance assumes importance, because unless we have ethics in corporate governance, just as we must have ethics in politics and ethics in bureaucracy, I don't think we'll be able to get rid of this problem. For every bribe taker there is a bribe giver and we have to tackle both of them in order to get rid of this problem.

QUESTION: Minister, while we very much appreciate the very friendly approach to foreign business that you espouse for India, can you elaborate a little bit more on the legislative and regulatory framework environment in India for foreign investment? For example, what is the highest corporate rate, tax rate, capital gains tax, is there foreign exchange control, because for someone coming from Hong Kong we enjoy all of those things, low tax, no capital gains tax, no foreign exchange controls. What would you do to make someone like me to invest in India?

And last but not least, what is the legislative protection for foreign investment? Are you party to the New York Convention 1953 whereby people who have disputes with Indian companies can have arbitration awards awarded in, let's say, Stockholm and then enforced in India?

MINISTER SINHA: Well, to take your first question first, no we don't have a tax-free regime. Foreign companies are subject to tax, like Indian companies are, subject to all the taxes which we levy in our country. There are certain concessions which are available equally to both, depending on which is the area where you are making investment. There are tax holidays for considerable periods of time. If for instance you are making investment in the infrastructure area, in this budget we have streamlined it, we have divided infrastructure into three categories, depending on the gestation period which is involved in each category, and we have given tax holidays starting from five years to 10 years, within a certain band or period of time.

I should think that the tax concessions which are available are quite attractive to enable foreign investors to come in, but yes, if your point is whether we are able to match Hong Kong, my answer is no, and also I can't hold any hope that in future we will have a completely tax-free regime for foreign companies. I don't think that will be possible.

But what we can ensure is a level playing field between Indian companies and foreign companies and that brings me to the second part of your question because, as far as investments are concerned, we have various models of bilateral investment promotion and protection agreements. We have such bilateral agreements, before the WTO, on GATT we used to have the MFN and today China is able to deal with the rest of the world in trade because it has MFN agreements with many of us, including India.

Similarly, we have these bilateral investment protection and promotion agreements under which we protect legally the investments which are made in India. We have negotiated such treaties with some 50-odd countries in the world. The one with Hong Kong is under negotiation. There is no acceptable international investment agreement yet, to which India could become a signatory along with other countries which will give this kind of protection. But let me tell you, Enron, of which Ronnie is a director and to which he referred, each contract has an arbitration clause and it says where the arbitration will be held. In this particular case, it is not any place in India, it is London where the arbitration will be held if it came to that.

So I think the arrangement that we have is quite fair and reasonable and that should not be a ground on which anyone should be in doubt about investing in India.

RONNIE CHAN: Am I also correct, Mr Minister, that in your recent budget, which I understand has not been passed through Parliament yet, you have proposed the lower marginal tax rate both for corporates and for individuals. Corporates went from something like 39 point something to 35 point something and personal from 35 point something to 30 point something. Is that correct?

MINISTER SINHA: Let me tell you this: one, that the budget has been passed by Parliament. It has even received Presidential assent so there is no problem with regard to the proposals that I had introduced in the budget.

As far as tax rates are concerned, we have not changed the slabs. There was a surcharge of 10 per cent direct taxes which I have removed in this budget. But tax rates in India, and again I'm not comparing it with Hong Kong, but they are quite reasonable. It was not done by me, it was done by my immediate predecessor in office, who reduced corporate taxes to 35 per cent and reduced he maximum of personal income tax to 30 per cent. We find that these rates are quite reasonable and compare favorably with the rest of the world.

In the four budgets I have presented I have not changed these slabs because I find them reasonable. Also, in order to carry or give an assurance to people within and outside India that tax rates can be stable, I have also said, and I'd like to repeat it here, that as far as the other taxes are concerned, namely the production tax which we call the excise duty, or import tariffs, as far as these taxes are concerned I have said they will undergo changes in future but these changes will be to the advantage of the producer and the consumer. It will not be to their disadvantage.

RONNIE CHAN: Thank you. I suppose ultimately the answer rests with many of you here, ladies and gentlemen, who are the non-resident Indians, are you satisfied that you will go back to invest in India? Obviously, speaking as a Hong Kong person, we love you all here. You are a very important part of our society, we hope that you stay here. But on the other hand, the day that NRIs begin to return to India en masse is really to me one of the biggest signs that India is really taking off. I assume that you have no objection to that.

MINISTER SINHA: None at all. You're quite right. I mean, often and even on this table there was a comparison we made between India and China. The one major area of difference between China and India is that we don't have a Hong Kong because I believe that half of the foreign investment which has gone to China has gone through Hong Kong.

RONNIE CHAN: That's right, yes. That's true.

MINISTER SINHA: So the NRIs, like the overseas Chinese, have a very important role to play and I hope they'll play it.

QUESTION: Minister, you alluded earlier to developments in the Bombay Stock Exchange and activities that have been done to clamp down on market manipulation there. I wonder firstly are you happy with the progress of the regulatory body in its investigation into market manipulation in Mumbai and elsewhere.

Secondly, could you explain what your vision is for India's stock exchanges given the changes that have recently been enforced on the Bombay Stock Exchange? Would you perhaps have a vision of markets which are more in line with the NSE?

MINISTER SINHA: We have a Parliamentary Committee which is enquiring into the recent manipulations of the stock market so I would not like to pre-judge the situation. But on the basis of what I have told Parliament, let me tell you that what happened in the Indian stock market in recent weeks was pure fraud. There were systems in place and some people violated the norms, broke the rules of the game, and indulged in malpractices.

The regulator has made preliminary enquiries into the goings on and they have come to the prima facie conclusion that some of the entities are guilty and they have proceeded to take action against them. Many of these issues are now before courts of law so I would not like to pass judgement on them.

But overall, what we have noticed is that there are certain areas where we were somewhat weak in terms of the regulatory framework and we have decided to go ahead and plug those loopholes and improve those systems. I have also said in Parliament that we shall give greater powers to the regulator so that they can deal with such situations more speedily and more effectively.

We are trying to introduce in our stock markets international best practices. Some steps have already been taken in that direction. We might have some temporary pain but I think in the long run these newer practices will work well.

QUESTION: Minister, one hears of the existence of a strong anti-liberalization lobby in the country in India and it apparently involves a lot of fairly important RSS people. What do you have to say about that? How far will they get? What might the future be with them so attached to the BJP Government?

MINISTER SINHA: I don't think we have to worry too much about their links with BJP. You are right in saying that there is a strong lobby within the country. It's a vocal lobby which is not in favour of some of the steps that we have enunciated or the policies that we are following. But if you look at the fact that liberalization of the Indian economy started in 1991, and since then we have had four prime ministers heading four different governments, and that in some way or the other all the political parties have either directly participated in those governments or have supported them from outside, the only conclusion that you can draw, or only two conclusions that you can draw, are:

(1) that there is national consensus for economic reforms; and

(2) that the language of the parties outside of office will be different than the language of the political parties when they are in power.

This is something which you can see because there are state governments which are being headed or ruled by different political parties. They are all following the economic reform part. But if BJP is in opposition in Rajahstan or in Mudaprudesh, where a local unit is opposing it while we are implementing it in Delhi, and the parties which are in opposition here, they are implementing it in their states and opposing it in Delhi. Well, that's part of politics. I don't think we should take it very seriously.

QUESTION: I'd like you to expand a bit more on an area touched on about five minutes back, and that's in relation to China. Could you tell us what are your views of how you hold China - to use a word which is in vogue right now - would you say it's a strategic competitor or a strategic partner and any specific programs which are in place right now in terms of economic co-operation?

MINISTER SINHA: Well, I would like to say that at this point of time, given the state of our economic relationship, we haven't yet become strategic partners. Our trade exchanges have been rising rapidly. I think both countries are realising each other's potential and are trying to take advantage of them. I think China has done extremely well. They are role models in various fields of economic activity and as the second-most populous country we are looking at China with a great deal of interest and we are trying to, as I said, co-operate with China, intensify our relationship with China, and collaborate with China on the international plain. That's what is happening at the moment.

We are competitors, like everybody else is competing with everybody else in global trade. They have their strengths, we have our strengths. It is the second year in a row that the International Monetary Fund has recognized both the economic progress and the economic strength of the two most populous countries, China and India. They have held out China and India as models of stability in an otherwise somewhat unstable world, and they are optimistic about the prospects of both countries in the future.

So I would say that there is a lot that India can learn from China, there are some areas where maybe China can take advantage of Indian experience, Indian expertise, and this is the direction in which bilateral relationship is moving.

RONNIE CHAN: It's quite late. Allow me to end with another story, Mr Minister, with your permission.

MINISTER SINHA: I promise I'll not tell you another.

RONNIE CHAN: Thank you. A friend of mine, who is a head of a think-tank in Delhi, came to see me one time and he told me a story. He said several years there was a Chinese delegation to India and as they were departing one senior Indian government official said this to the Chinese, "Imagine if we were to have a trans-Himalayan free trade zone that would include 2.2 billion - 2.3 now billion people of the world, now that would be powerful."

So how nice if the two countries would not treat each other as enemies. I hope that both sides will not call each other potential enemies, and as an example, if you have a nuclear device, don't tell the world that China is really who you're aiming at. It would be very unfortunate if two countries who have never subjugated their neighbors, and yet are neighbors of one another, were at odds with each other. It does not suit either country.

So I hope, Mr Minister, that the two countries will continue to develop good relationships, as in the past. Your last word.

MINISTER SINHA: Amen.

RONNIE CHAN: Thank you very much. Mr Minister, I would like to present to you a small memento in memory of tonight. Thank you very much for being with us, thank you for being so gracious to spend your time with us. Thank you very much, Mr Minister.