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May 19, 2005

"With Special permission from the Wall Street Journal"

by Dr. Manmohan Singh

If a commitment to remain an open society is one of the pillars of India's nationhood, the other is our commitment to remain an open economy -- one that guarantees freedom of enterprise, respects individual creativity, and mobilizes public investment for social infrastructure. Indeed, it would be no exaggeration to suggest that these are the principles to which all countries will increasingly want to adhere.

Just as developed industrial economies enabled "economies in transition" to graduate into open economies, developed democracies should also assist "societies in transition" to become open societies. I believe India's policies toward the world have been shaped by this commitment, and we should be proud to identify with those who defend the values of liberal democracy and secularism across the world.

Over the past decade, the debate in India on the nature of our interaction with our wider Asian neighborhood -- and with major powers -- has also been shaped by sweeping changes in our economic policy. The initiatives India took in the early 1990s toward economic liberalization have not only altered our interaction with the world, but have also shaped global perceptions of India. Indeed, they have shaped more than mere perceptions. They have altered the manner in which other nations, big and small, relate to us. Today, there is a greater willingness internationally to work with India -- and to build relationships of mutual benefit.

The steps that successive Indian governments have taken since 1991 have helped to finally remove what development planners used to refer to as the "external constraint" on growth. Indian industry and Indian professionals have demonstrated their ability to step out with confidence from a highly protected environment into a mercilessly competitive one.

We do have a vast unfinished agenda of social and economic development, and my government's priority will be to implement this. Doing so will further enable us to deal with the challenges of globalization. The global environment has never been more conducive to India's economic development than it is today. The world wants India to do well. However, we recognize that our real challenges are at home. It is for this reason that we place such great emphasis on increasing investment in infrastructure, agriculture, health and education, urban renewal and the knowledge economy. Having ensured that there is today no external constraint on growth, we must now ensure that there remain no internal constraints to development.

To say that the external constraints on growth have gone, however, is not to suggest that we are making full use of new opportunities. There is much more that we can do to draw on global savings and global markets. As a developing economy, we must tap international resources to fuel our development. We should be more open to global capital flows and better prepared to take advantage of new markets for goods and services. India is wholly committed to multilateralism in trade: But we will seek the reform and democratization of multilateral institutions.

Globalization is both an opportunity and a challenge. A decade ago, who could have imagined that India would be a major software services exporter and that a new process of "brain gain" -- not "brain drain" -- would be created by opportunities in these sectors? We now ask ourselves if we are doing enough to secure this edge. The growth of India's knowledge economy has opened up new markets for science- and technology-based products. In manufacturing, too, there are global opportunities. The end of the multifiber agreement opens up new vistas for trade in textiles.

India would like to make globalization a "win-win" game. How we deal with its challenge -- and how we make use of its opportunities -- will shape our relations with the world, and the perception of our capabilities as a nation. This has already happened in substantial measure. Our relations with major powers, especially the U.S. and more recently China, have increasingly been shaped by economic factors. Who could have imagined that China would emerge as our second largest trade partner? In the case of the U.S., an acceleration of people-to-people contact and the consequent business-to-business interaction has forged closer state-to-state relations. Shared values and growing economic links have enabled a closer strategic engagement.

Similarly, business and commerce also underpin India's strategic partnership with the European Union. It must be our endeavor to ensure that economic and commercial links contribute to a strong and new element in our traditionally friendly relations with Russia. In fact, I believe that our strategic relationship with the Russian Federation can be greatly enriched by a greater focus on bilateral economic relations. Renewed cooperation in the economic field is giving a new profile to India's relations with Japan, with Japanese investment flows set to increase. Concern for energy security has become an important element of Indian diplomacy and is shaping our relations with a range of countries across the globe, in West Asia, Central Asia, Africa and Latin America.

It is notable that the response of other countries to India's national security concerns is being shaped by perceptions of business and economic opportunities. Countries that imposed sanctions on India when we declared ourselves a nuclear weapons power are building bridges with us, to take advantage of the opportunities for mutual economic benefit. None of us can underestimate the role of economic interdependence in international relations. The example of the EU, Asean and Apec, Nafta and other regional groups shows that the most dynamic economies are creating such relationships for mutual benefit, regional security and peace.

Indeed, India seeks to be more closely engaged with such regional groups. Our links with each of these regions is both civilizational and contemporary, with people of Indian origin acting as a cultural bridge between our multicultural societies. Our foreign policy is, of course, shaped by our civilizational alues, and by our commitment to peace and freedom. But it is now equally shaped by our commitment to our economic development, within the framework of an open society and an open economy.

Mr. Singh is prime minister of India. He completes a year in office on May 22.