[Congressional Record Volume 141, Number 10 (Wednesday, January 18, 1995)]
[Extensions of Remarks]
[Pages E122-E123]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


      INDIA AND THE UNITED STATES: A GROWING ECONOMIC PARTNERSHIP

                                 ______


                         HON. GARY L. ACKERMAN

                              of new york

                    in the house of representatives

                       Wednesday, January 18, 1995
  Mr. ACKERMAN. Mr. Speaker, today I rise to speak about the 
flourishing economic relationship that is unfolding between the United 
States and India. Just a few years ago, hardly anyone spoke of the 
tremendous opportunity for developing strong economic ties between our 
countries. Today, for a number of important reasons, we are witnessing 
dramatic change in this domain. We are engaged in an economic 
relationship with India that is strengthening the ties between our 
countries.
  Just last week, several major American papers published excellent 
articles on the state of United States-India trade. Each of them 
describes in detail how the liberalization of the Indian economy, 
initiated by Prime Minister Rao, has created fertile ground for 
American businesses to interact with their Indian counterparts abroad, 
creating new jobs at home while servicing a huge untapped market 
overseas.
  I am inserting into the Record today an article from the Wall Street 
Journal of January 12, 1995, which I commend to my colleagues. Titled, 
``India Is Elbowing Into China's Limelight: Foreign investors Taking 
Note of Economic Revival,'' this article highlights the opportunities 
for building American business and creating new American jobs.
  Mr. Speaker, I am proud of the enhanced relationship which is now 
unfolding before us. This is due in no small part to the creativity and 
determination of American businesses to expand their exports to new, 
fertile markets. We should also acknowledge, and pay tribute to, the 
Indo-American community which has taken a particularly keen interest in 
promoting economic ties between our nations. This community deserves 
recognition and thanks for helping to forge lasting economic ties that 
will strengthen mutual friendship between our countries in the months 
and years ahead.
             [From the Wall Street Journal, Jan. 12, 1995]

India Is Elbowing Into China's Limelight: Foreign Investors Taking Note 
                          of Economic Revival

                          (By Urban C. Lehner)

       Bangalore, India.--K. Gopalkrishnan was braced for the 
     worst when Motorola Inc. transferred him from his native 
     Singapore to a new pager factory in this southern Indian 
     city. Although of Indian descent himself, the 35-year-old 
     executive had heard horror stories about India's bureaucrats 
     and workers.
       His first nine months in Bangalore have been a pleasant 
     surprise. Clearing a new assembly line through Indian customs 
     was a breeze, he says; the whole process, from packing the 
     line in Singapore to producing the first pager in Bangalore, 
     took only eight days. Indeed, the entire factory was set up 
     in just five months, and it's already operating as 
     efficiently as the Singapore plant. ``Contrary to what you 
     hear outside the country, Indians can be among the most 
     efficient people in the world, if properly guided,'' Mr. 
     Gopalkrishnan says.
       But not the most efficient people, at least not yet. 
     Motorola's older, larger factory in Tianjin, China, ``has 
     produced some benchmark results that everybody else [within 
     Motorola] is battling'' to match, Mr. Gopalkrishnan says. 
     ``We hope to be in those shoes soon.''


                               high hopes

       Thanks in part to foreign-investment success stories like 
     Motorola's, many Indians hope their economy can soon be in 
     China's shoes, too. It's a tribute to how far India has come 
     that they even dare express the hope. For, until very 
     recently, China was everybody's nominee for most-likely-to-
     become-an-economic-superpower. India was a chronic 
     underperformer that seemed unable to get its act together.
       But India's three-year-old reform program has started to 
     bear fruit just as foreign investors have begun to take a 
     more sober view of China. As a result, many Indians are 
     starting to take their country seriously as a rival to China. 
     ``Sooner or later, India's inherent advantage will assert 
     itself,'' says Manmohan Singh, India's finance minister and 
     the author of the reforms.
       Judged on fundamentals, the competition between India and 
     China is still no contest. China's economy is growing twice 
     as fast. China's savings and literacy rates are more than 
     half again higher. Foreign debt and government red ink drag 
     down China's economy far less than India's.

                           WHO'S THE FAIREST?                           
------------------------------------------------------------------------
                                                         India    China 
------------------------------------------------------------------------
Savings rate\1\.......................................    24.2%    35.8%
'95 Debt-service ratio\2\.............................    29.2%    13.0%
Avg. GDP growth:                                                        
    1988-93...........................................     5.3%     8.9%
    1995-2000\2\......................................     6.0%     7.8%
Population (millions).................................    846.3  1.172.0
``Economic Freedom'' ranking (1=most free)............       86       87
------------------------------------------------------------------------
\1\1993 for India, 1992 for China.                                      

     [[Page E123]] \2\Projection.
     Sources: Asian Development Bank, Credit Lyonnais Securities, 
     Heritage Foundation.
       Yet in the competition for foreign investors, India is 
     starting to make China share the limelight. Foreigners lapped 
     up $4.6 billion of new Indian equity-linked paper last year 
     but only $2.7 billion in new Chinese shares, according to the 
     Bombay Stock Exchange and Credit Lyonnais Securities (Asia) 
     Ltd.
       India has also been attracting new interest from foreign 
     companies. A Daewoo Co. joint venture in India plans to make 
     100,000 cars a year starting this year; the South Korean 
     company has yet to win permission to make cars in China, 
     though it is undertaking a major auto-part project there. 
     Kellogg Co. recently started producing cornflakes north of 
     Bombay; the U.S. breakfast-cereal company won't open a plant 
     in China until the middle of this year. Levi Strauss & Co., 
     working hand-in-hand with Indian subcontractors, will begin 
     selling jeans in India within months; the San Francisco-based 
     concern has been phasing out clothing purchases from 
     subcontractors in China because of human-rights concerns.
                             u.s. road trip
       More corporate investments are coming. U.S. Commerce 
     Secretary Ron Brown heads to India this week with 25 American 
     chief executives who are expected to sign several billion 
     dollars in deals; the trip comes five months after Mr. Brown 
     undertook a similar mission to China. In a recent Ernst & 
     Young survey of 230 multinational companies, 17% saw India as 
     a ``priority country'' for future investment, ranking India 
     second only to China.
       China's lead in the foreign-investment sweepstakes remains 
     enormous, however. Foreigners last year sank well in excess 
     of $30 billion into operations in China, compared with less 
     than $2 billion in India.
       It's also far from clear that India can ever make up for 
     China's 15-year head start. While three years of reforms may 
     have revived India's economy, they haven't papered over its 
     seething ethnic and class divisions, done away with its 
     corrupt and inefficient bureaucracy, or rid its city streets 
     of beggars.
       But at least foreign investors are finally noticing India's 
     assets, among them:
       India has a huge middle class whose buying habits are well-
     chronicled, unlike in China, where dependable market 
     statistics are rare. The Indian government-supported National 
     Council of Applied Economic Research, for instance, 
     periodically surveys samplings of as many as 500,000 Indians. 
     The council's 1992-93 survey indicates that 550 million 
     Indians lived in households where at least one member owned a 
     wristwatch; that 33% of nail polish was bought by households 
     with a monthly income of less than 18,000 rupees ($574); and 
     that southern India accounted for 77% of the country's 
     purchases of coffee.
       India has skilled scientists and software engineers. 
     Motorola, Texas Instruments Inc. and other foreign investors 
     have turned Bangalore into one of the world's software-
     writing capitals. India abounds in qualified people because 
     its universities emphasize computer science and because 
     ``Indians naturally love intellectual puzzles,'' says Anand 
     Khandekar, a retired Indian navy commodore who supervises 220 
     engineers at a Motorola software laboratory here. The Indian 
     engineers are good, and they are affordable. A Texas 
     Instruments official says a typical software engineer in 
     Bangalore costs $400 a month in salary and benefits.
       India has well-managed private companies. In China, the 
     potential partners for foreign investors are mainly state-
     owned companies and the potential stock plays are all recent 
     listings. The 120-year-old Bombay Stock Exchange, on the 
     other hand, in 1994 had almost 4,450 listed companies, more 
     than any other exchange in Asia. The people who run many of 
     these companies have far more in common with many global 
     executives than do their Chinese counterparts. In everything 
     from their attitude toward profitability to their 
     understanding of how a contract dispute should be solved, 
     they are far easier to work with, many foreign firms find.
       India's Western-style legal system was one of the things 
     that attracted U S West Inc. to India, says Boli Medappa, 
     who's in charge of developing the telephone company's 
     business in the country. U S West, a Baby Bell that operates 
     telephone systems in 14 U.S. states, spent five months in 
     1990 researching business opportunities in 11 Asian 
     countries. In the end India ranked first on its list, Ms. 
     Medappa says. China ranked 11th.
       The ranking was done mainly on criteria such as political 
     stability and market access, but Ms. Medappa also gives India 
     the nod on less tangible factors, such as the widespread use 
     of English, a long-functioning democratic government, an 
     Anglo-Saxon legal system and a sense of shared values with 
     the West.
       India also gets a boost from the enthusiastic cheerleading 
     of ``nonresident Indians'' like Ms. Medappa, a green-card 
     holder who has lived in the U.S. since 1978 and worked for U 
     S West for eight years. Unlike overseas Chinese 
     entrepreneurs, who invest their own money in China, many 
     nonresident Indians advocate investment in India by the 
     multinational companies that employ them.


                           it's who you know

       ``For every foreign company I've seen come to India, the 
     guy who was actually making that effort happen was an ethnic 
     Indian,'' says Naina Lal Kidawai, Morgan Stanley & Co.'s 
     chief of corporate finance in Bombay.
       Another attribute of India is simply being the world's 
     second-biggest potential market, after China. That's 
     especially alluring as a spate of loan-payment problems and 
     contract disputes reminds foreign investors of the 
     difficulties of doing business in the Middle Kingdom.
       But investors are hardly deserting China in droves. And 
     experienced foreign investors know India also can pose 
     frustrations. For example, U S West and other foreign phone 
     companies have camped out in New Delhi hotels for months 
     awaiting a government auction of operating-rights contracts 
     that keeps being promised.
       And while India has slashed tariffs and tackled its 
     government budget deficit, it has balked at more painful 
     measures, such as privatizing government enterprises, 
     allowing imports of many foreign consumer goods or making it 
     easier for companies to lay off workers.
       Finance Minister Singh insists the government's program is 
     on schedule, but adds it cannot get too far ahead of public 
     opinion. Mr. Singh makes no apologies for this; one of the 
     advantages of a democracy, he says, is that public opinion 
     helps check misguided policies. That mechanism is absent in 
     China, he points out.
       If democracy keeps India from developing as fast as China, 
     some analysts say it also gives India a stability that 
     transcends its occasional outbursts of communal violence. 
     ``Think of India as a wide, shallow-bottomed boat,'' says 
     Jonathan Bensky, commercial counselor at the U.S. Embassy in 
     New Delhi. ``It's easy to rock but very difficult to tip 
     over.''
     

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