Assistant Secretary of State Robert Blake on the 'Tremendous Synergies' between the U.S. and IndiaPublished: May 05, 2011 in India Knowledge@Wharton
Robert Blake, U.S. assistant secretary of state for South Asia and Central Asia, is a man with a deep understanding of the Indian subcontinent. He served as deputy chief of mission at the U.S. embassy in New Delhi from 2003 to 2006. He has also served as ambassador to Sri Lanka. According to Blake, the U.S. and India are "increasingly working together to address some of the world's biggest challenges." In a conversation with India Knowledge@Wharton during the recent Wharton India Economic Forum, he spoke about the various facets of the U.S.-India strategic partnership. Significant business opportunities, Blake said, will arise from the "tremendous growth" that is currently taking place in India.
An edited transcript of the interview follows:
India Knowledge@Wharton: At the Wharton India Economic Forum, you indicated that President [Barack] Obama's visit to India last November was one of the most successful trips ever taken by an American president to South Asia. You also spoke about the global strategic partnership between the U.S. and India. What do you think are the principal business opportunities for American and Indian companies that arise from this partnership? And how would these differ from those that existed before?
Robert Blake: That's a very good question. First of all, the global strategic partnership that I talked about was that the U.S. and India are increasingly working together to address some of the world's biggest challenges, from things like non-proliferation to climate change to trade. But increasingly, we're also working at the bilateral level on specific issues in specific countries. I mentioned, for example, that we're working in Africa to help develop agricultural production. This is the first trilateral cooperation between the U.S., India and Africa. We're doing the same in Afghanistan in promoting women's empowerment and also agriculture, which is a very high priority for the U.S. as a way of encouraging rank and file Taliban to give up the fight and go back to their families and to good employment.
I don't see huge business opportunities in those kinds of things because these are for the very poorest of the poor. The greater business opportunities are to be had in just the tremendous growth that is taking place now in India. [This is] despite some of the shortcomings we talked about -- corruption, infrastructure problems and so forth. The Indian government is very much committed to dealing with those. In fact, those themselves present some quite significant opportunities -- infrastructure for instance.
I made the point that 80% of the India of 2030 is yet to be built, so there are going to be vast opportunities in areas such as the development of airports, regional airports, railway networks, fiber-optic networks... I think there will also just be tremendous new start-up opportunities that will come about as a result of the new educational partnerships that we're going to seek to establish and the fact that so many young people in India will be coming through the educational system and the higher educational system, and will have access to capital for the first time. And because of their ingenuity and because of the things that they will learn in American universities and vice versa, there will be a tremendous fertile ground for new projects and new ways of thinking that we're seeing in the U.S. and we're beginning to see in India as well.
If you go to a place like Hyderabad or Gurgaon, you see these kinds of petri dishes of innovation that are now taking hold in a very exciting way in things like nano-technology and biotechnology and so forth.
India Knowledge@Wharton: Do you see any actual deals in the works so far, or is this still at the level of aspiration?
Blake: There are deals taking place all the time, far more than anything the U.S. government could ever track. Again, we're in the business of creating the environment for these deals to take place -- not to actually conclude them ourselves. And I think they are taking place as can be seen by the doubling of our trade over the past several years and the significant rise of investment both in India and in the U.S. from India.
India Knowledge@Wharton: In a sensitive area like defense, for example, are things now possible that were not possible before? And what are the new opportunities?
Blake: As I mentioned, the Defense Research and Development Organization has come off the Department of Commerce's entities list, so for the first time we're going to be able to work with them. That's the research arm of the Ministry of Defense, like our own DARPA in the Department of Defense in Washington [that] has been responsible for some great innovations. We can now begin to work together on some of those things. So there are tremendous synergies that can be exploited. I think when you add in the private sector, which is already very well developed both in India and the U.S., the synergies are magnified. So I do see a lot of opportunities, and I think there will be some quite interesting co-development and co-production opportunities that will result from those.
India Knowledge@Wharton: What about clean energy? You also spoke positively about the opportunities there.
Blake: Again, this is an area of tremendous headroom and room for growth. First of all, our own administration is committed to developing clean energy opportunities and President Obama has put enormous effort into this, even in the face of some of the fiscal constraints that we have. I think he has made this a priority, and quite rightly, because we want to reduce, as India wants to reduce, its reliance on foreign oil and foreign gas.
We, for example, have made tremendous progress in the area of developing shale gas, and we're helping India to develop that as well. In our case we found such significant quantities that we've actually dramatically reduced our imports of gas. I think the same can probably be the case for India. So our U.S. Geological Survey and other experts are working with your experts to see what the real opportunities are, and I believe that they're going to be quite significant.
On other kinds of clean energy, we see that there are tremendous synergies because many of the companies that are doing advance work in the U.S. are already active in India. And, quite frankly, some of the leading innovations taking place around the world are in India. India has become a real node of innovation in part because it never really stopped, whereas we kind of missed the boat for a while, under some of the previous administrations who weren't as committed to developing clean energy. So we lost that momentum. India has sustained it. As a result, you see companies like Vestas and others that are some of the world leaders now in both solar and wind technology. So there's a lot we can learn as well from the Indians. Again, that's part of our incentive.
India Knowledge@Wharton: What are some of the risks that could undermine these opportunities, and how could those be hedged?
Blake: I'd say one of the principal risks that a lot of people worry about is simply that the momentum that has been established now in our relations will not be sustained. People are worried about the situation inside India itself, and the fact that many of the projects that we're trying to get underway have been delayed a little because of the political divisions that exist, particularly in the Indian parliament. I think that the vast attention that has been given to the corruption controversy has really crowded out a lot of the opportunities that could have taken place.
Let's take the Education Bill, which we had hoped might be passed last fall but in fact is still pending. Here we are, many months later, with no real end in sight of when it might be passed. I think there are a number of examples like that. Of course the same is true on our side. We ourselves I think are consumed by the need now to focus on our own fiscal realities and to try to get our own economic house in order and try to bring more discipline. That's certainly a very high priority of our President's, but also of the Republican leadership as well.
I think the one advantage that we have, that perhaps other countries might not have together, is that our private sectors are moving ahead very smartly, regardless of what the governments do. It's something that I always remind my colleagues in government, that despite sometimes slow progress in our own bilateral trade negotiations, the private sector is moving very smartly. Our trade has doubled over the past five years or even less than that. And it's likely to double again in a very short period of time regardless of what our governments do. Of course if we can actually get some progress on our own, that will help even more.
India Knowledge@Wharton: One of the examples you referred to as a good thing happening was the civil nuclear deal.
India Knowledge@Wharton: You have said in the past that it opens the way for U.S. companies to supply billions of dollars' worth of civil nuclear reactors for India's growing energy market. Have recent events in Japan led you to rethink any aspects of the nuclear deal? And what can be done to ensure that India doesn't face any nuclear disasters?
Blake: Of course, our main purpose is to support our companies in this. I think that some of our industry leaders have pointed out that this is a setback for their industry, and that this is going to cause a lot of people to take a new and fresh look at the nuclear industry overall.
In the U.S. there haven't been new nuclear power investments in a long time, so in a way, that's nothing new. And for us, the importance of India is that in fact there are quite significant nuclear investments. That's why there's such strong interest on the part of General Electric and Westinghouse and other companies because they see huge upsides to our cooperation in India. And from India's perspective, they have a strong interest in diversifying their energy supplies and to access clean energies as much as possible. Not just renewables, but also nuclear energy. So again, there's a very strong upside for India as well.
But there will have to be a good, honest discussion about the safety issues. I know you have an open society in India that debate is already happening. There have been demonstrations in several of the nuclear plants, and the Lok Sabha and others will be looking closely at this issue. Again, that's a good thing. That's what should happen after a calamity like this -- that people take a hard look so that what we're doing makes sense, and is in our interest.
I think there probably will be a little bit of a slowdown, but I agree with what the Prime Minister [Manmohan Singh] said, that it is still very much in India's interest to proceed with these projects and it is likely to do so.
What's most important from our perspective is that the two governments have done almost all that we need to do to allow the companies to make the decisions about whether they want to go forward with this or not. And in India's case, it signed the Convention on Supplementary Compensation and is now committed to ratifying that within a year from November. A far as we know, that remains on track and that remains their intention. And then at that point it will be up to the companies to undertake these contract negotiations and they will make their own decisions about this. I think what's happened in Japan will affect those to a certain extent. But I'm not really an expert to gauge to what extent that will happen.
India Knowledge@Wharton: This seems like one of those issues that, given a lot of political polarization that already existed earlier, could cause political tension again.
India Knowledge@Wharton: To take a somewhat different issue, recently in Hainan, Prime Minister Manmohan Singh and other leaders from Brazil, Russia, China, and South Africa called for a new global monetary order in which the U.S. dollar would play a less prominent role. In your view does an initiative like this advance or undermine the strategic partnership between the U.S. and India?
Blake: I don't see it having a major impact one way or the other. During the President's visit, Manmohan Singh expressed strong confidence in the dollar and strong confidence in the economy. And I don't see this as something that's anti-American or directed against the U.S. I must say I didn't hear very much of a reaction. I'm responsible for India, [but] I never heard a reaction from some of my colleagues about this. So I don't think it's had any particular negative impact.
India Knowledge@Wharton: You also spoke about the bottom of the pyramid strategy that companies refer to. Have you seen any such initiatives in the works between American and Indian companies?
Blake: I think a lot of American companies in India are already pursuing a bottom of the pyramid strategy. They understand that there are in fact quite interesting opportunities to market to the very poor, because it's a matter of packaging, really, of getting small, slightly smaller packaging. Because you're selling to such a large market, your margins are going to be perhaps a little smaller but the overall benefit is quite large. I think many of our companies have seen that and are doing well by it.
The other point to make is that many people, because of India's growth, are coming out of poverty now. So the bottom of the pyramid is [diminishing] and the levels of income are getting higher and higher. Those people, in fact, are slowly moving up the chain of the kinds of products they're able to buy. And increasingly, those are things that American companies would like to offer.
India Knowledge@Wharton: The next presidential election in the U.S. is still some time away. Some preparations are already starting up. Given the fact that unemployment in the U.S. is still high and economic recovery has been weak, to what extent do you expect outsourcing of high tech jobs to India to become an issue? And will it have a serious impact on U.S.-India business relations?
Blake: Outsourcing is always a hot button issue around elections, particularly when unemployment is high. People naturally take a look at these kinds of things. But the point I would make about our economic relations with India is that they're increasingly balanced. The kind of offshoring that is taking place is an economic reality around the world now. Companies have plants in China and in India to be able to avail themselves of whatever the opportunities are in those countries. Every country has slightly different opportunities and advantages to offer. So a big company like GE is going to have research centers all over the world. Because of the Internet they can bring all their scientists and engineers together in one big web and pool that knowledge and those ideas to create something really interesting.
That's what's happening. I think that that's the competitive edge that every company needs, and that's true of India, too. India's doing exactly the same thing in reverse. The Infosyses of the world, and Tatas and others are setting up their own centers in Iowa and Michigan and places like that. That's the point I always make to American audiences -- that yes, some of this is happening, but this is part of keeping these companies in business. Secondly, the Indians are doing the same in reverse. A lot of new Indian investment is coming in and the pace is quite dramatic. It's 50% increase every single year. So we're going to see a lot more of this over time. That's a very good thing for us.
I made the point also about tourism. One of the really interesting manifestations of the rise of the middle class in India has been that for services like, of course IT, but even tourism -- 650,000 Indians visited the U.S. last year. That itself represented a 20% increase from the year before, and they are now the 10th largest source of foreign travelers into the U.S., which is a very good thing. I expect that to rise.
India Knowledge@Wharton: One last question. This year marks the 20th anniversary of economic reforms that Prime Minister Singh initiated in 1991 when he was finance minister. With 20/20 hindsight, no pun intended, what do you think has been accomplished by these reforms, and what are the biggest tasks that still remain to be accomplished?
Blake: I think the reforms have had a profound effect on India. Not just economically, but in terms of India's entire outlook.
When I first arrived in India, the country was still slightly inward looking but was just beginning to change. I think as a result of the economic reforms, growth began to generate resources and those resources gave the Indian government and Indian society the wherewithal to expand their strategic horizons and to expand their strategic ambitions. And India in the past seven or eight years has really stepped into that space in a very significant way, in partnership with the U.S. in part.
You really see now that India wants to play a global role and wants to exert its very positive influence around the world. That's one of the most important new dynamics that's taking place. That's why President Obama wants to partner with India [and] why India wants to work with us. It wants to be a responsible member of the international community, it has the resources to do so, and it has the will to attack some of the really tough issues like global governance and climate change and non-proliferation, and to work in tandem with the U.S. to do that. That is a very important development for the U.S. and that's why President Obama says that India's going to be a defining partnership of ours in the 21st century.
India Knowledge@Wharton: Robert Blake, thank you so much for speaking with us.
Blake: Thank you. It's a pleasure.