“I am deeply honoured at this invitation to speak at the Central Party School of the Communist Party of China. Ladies and Gentlemen, I am conscious of the unique place that this School holds in the governance system of contemporary China and its contribution to the remarkable transformation of Chinese society. Many of you will play a decisive role in shaping China’s future development, which will be of great significance for Asia and the world.

I can think of no better place than this School to speak about India and China in the new era.

Relations between India and China are unique in the world. We are two continuous ancient civilizations. We are neighbours with a long history of cultural, spiritual and economic ties. We both embarked on a new phase of our political histories around the same time. Today, we are the world’s two most populous nations, engaged in a process of socio-economic transformation of our people on a scale and at a pace unprecedented in human history.

Both our countries have achieved considerable success in this endeavour. Indeed, China’s early economic reforms and impressive achievements are a source of inspiration across the developing world. After China, India has been the fastest growing major economy in the world, averaging a growth rate of 7% per year over the past two decades and around 8% per year during the past ten years. As a result, both our economies have expanded several times. We have achieved a high degree of economic modernization and have lifted hundreds of millions of our people out of the clutches of poverty.

In our own ways, we have also had an impact in shaping the global economy – China in the manufacturing sector and India in the services sector.

Over the past two decades, the process of economic reforms in India has gone through the rigour of democratic debate, and met the test of political consensus and public support. India’s policies have focused not only on accelerating growth, but also on making it sustainable and regionally balanced. We have emphasized not only modernization, but also addressing the challenges of opportunities, capacity and equity for our vast and diverse population. This is the path on which we will continue to move forward.

In structural terms, India’s growth is propelled by domestic demand and financed largely by our own resources. But we are also increasingly integrated into the global economy. The prolonged global economic crisis has affected us, as it has many other emerging economies. I believe, however, that this is a temporary disruption. In recent months, we have taken measures to enhance foreign investment flows, speed up implementation of major projects, boost infrastructure development, strengthen our financial markets, reform our tax system and make our business environment more attractive.

Our effort is to return the Indian economy to a sustained growth rate of 7-8% per annum. We believe that the underlying fundamentals of our economy, particularly investment and savings rates, are strong and consistent with this projection.

India’s critical challenges in the days ahead are precisely in areas where I see opportunities for cooperation between India and China and I would like to highlight eight specific areas in this regard.

One, we need to pay much greater attention to the expansion and modernization of our infrastructure.

India plans to invest one trillion U.S. dollars in infrastructure in the next five years and we would welcome China’s expertise and investment in this sector.

Two, we need to increase our agricultural productivity in order to reduce rural-urban disparities in income and manage efficiently the process of mass urbanization, which is a phenomenon common to both our countries. This will mean paying particular attention to the issues of water and waste management.

China has significant experience of urbanization and our national planners, city administrators and entrepreneurs should share experiences and seek solutions in dealing with the physical, social, environmental and human challenges of mobility and urbanization.

Three, we want to draw upon China’s strength in the manufacturing sector, which is vital for providing mass employment. India, for its part, has strength in services, innovation and certain manufacturing sectors, which can benefit China. A linked challenge for India is in skill development, where we can learn from each other’s experience.

Four, as large and growing consumers of energy, we should intensify cooperation on the shared challenges of energy security, including joint development of renewable energy resources, as well as working jointly with third countries.

Five, growing population, shrinking land, improving consumption levels and price volatility make food security a key policy priority for us. India has launched a major legislation-based food security programme. Our two countries should pool our resources and expertise in this area.

More broadly, in an uncertain global environment, India and China can work together to impart stability to the global economy and sustain growth in our two economies by leveraging our resources, large unsaturated demand, economies of scale and our growing income levels.

Six, in an integrated world, economic success requires a favourable external environment. In recent decades, India and China have been among the greatest beneficiaries of an open global economy; a rule-based and open international trade regime; and free flow of finance, information and technology.

However, the emerging global environment may not remain as favourable as it has been in recent decades. We should therefore work together to make the international economic environment more conducive to our development efforts. Please allow me to elaborate this point.

After the prolonged global economic crisis of 2008, we face a fundamentally different future for the world economy. We are in the midst of a significant and ongoing transformation where both political and economic power is being diffused. A multi-polar world is emerging but its contours are not yet clear.

Protectionist sentiments in the West have increased and the global trading regime may become fragmented by regional arrangements among major countries. India and China have a vital stake in preserving an open, integrated and stable global trade regime even as we work together to foster regional economic integration. We should also intensify our efforts to support trade and investment and reduce risks in emerging markets. The BRICS Development Bank and the Contingency Reserve Arrangement are examples of such cooperative efforts. Our cooperation will also help accelerate reforms in global financial institutions.

Seven, while we welcome and celebrate the rapid economic growth of our economies, we must also confront the challenges of climate change and focus greater attention on the safeguarding of our fragile environment. Both India and China are heirs to civilizations that value Nature and have practiced sustainability through the ages. However, as we meet the basic needs of our people, we also face the danger of unfair burdens being imposed on us for mitigating climate change. We should ensure that the international response to climate change does not constrain our growth and that it continues to be based on the principle of common but differentiated responsibilities.

Eight, India and China have also benefited from a largely stable global order and peaceful periphery. But we cannot take a stable political and security environment in our region and beyond for granted. If we look carefully, many of our challenges are common. Terrorism, extremism and radicalism emanating from our neighbourhood affect both of us directly and can create instability across Asia. Similarly, maritime security in the Pacific and Indian Oceans is vital for our economies just as peace and stability in West Asia and Gulf are essential for our energy security.

Above all, India and China need a stable, secure and prosperous Asia Pacific region. The centre of gravity of global opportunities and challenges are shifting to this region. In the coming decades, China and India, together with the United States, Japan, Korea and the ASEAN Community, will be among the largest economies in the world. While this region embodies unparalleled dynamism and hope, it is also one with unsettled questions and unresolved disputes. It will be in our mutual interest to work for a cooperative, inclusive and rule-based security architecture that enhances our collective security and regional and global stability.

While both India and China are large and confident enough to manage their security challenges on their own, we can be more effective if we work together. Regional stability and prosperity will also gain from stronger connectivity in the Asia-Pacific region. This should be a shared enterprise of India and China.

I have said on several occasions that India welcomes China’s emergence. Frankly, old theories of alliances and containment are no longer relevant. India and China cannot be contained and our recent history is testimony to this. Nor should we seek to contain others.

We both know that the benefits of cooperation far outweigh any presumed gains from containment. Therefore, we should engage with each other in a spirit of equality and friendship and with the confidence that neither country is a threat to the other. This is the essential premise of India’s external engagement. Our strategic partnerships with other countries are defined by our own economic interests, needs and aspirations. They are not directed against China or anyone else. We expect a similar approach from China.

The landmark visit of Prime Minister Rajiv Gandhi to China 25 years ago marked a new beginning in our relationship. Since then, successive leaders in our two countries have built on that historic opening. Over this period, our relationship has prospered and our cooperation has expanded across a broad spectrum of areas. This is because we have managed our differences and have, in general, kept our border regions tranquil. At the same time, we continue to make progress in resolving our border dispute. Having agreed to the Political Parameters and Guiding Principles, we are now discussing a Framework for a fair, reasonable and mutually acceptable boundary settlement.

This stability in our relationship has created the basic conditions for our two countries to exploit the opportunities created by our economic growth and opening. Indeed, the most dynamic area of our relationship has been economic and China has emerged as one of India’s largest economic partners.

Naturally, there are also concerns on both sides – whether it is incidents in the border region, trans-border rivers or trade imbalances.

Our recent experiences have shown that these issues can become impediments to the full exploitation of the opportunities for bilateral and multilateral cooperation between India and China, which is important for the continuing progress and transformation of our two countries.

I believe that our two countries not only share a common destiny, but that we have unlimited possibilities for closer cooperation. Let me therefore outline seven practical principles of engagement that I believe will set India and China on this course.

One, we should reaffirm an unwavering commitment to the principles of Panchsheel and conduct our relationship in a spirit of mutual respect, sensitivity to each other’s interests and sovereignty, and mutual and equal security. India has welcomed President Xi Jinping’s concept of a new type of great power relations. This is a contemporary development of the Panchsheel or Five Principles of Peaceful Co-existence, elaborated by Prime Minister Nehru and Premier Zhou Enlai in the 1950s. It highlights, in a modern context, the need for creating inter-state relations among major powers, based on mutual trust, sensitivity to each other’s core concerns and a commitment to resolve all outstanding issues through peaceful dialogue. We should develop our relations on the basis of these principles.

Two, maintaining peace and tranquility in the India-China border areas has been the cornerstone of our relations. It is essential for mutual confidence and for the expansion of our relations. We should do nothing to disturb that. Indeed, we can achieve it by adhering to our agreements and utilizing our bilateral mechanisms effectively. At the same time, we should move quickly to resolve our boundary issue.

Three, we should increase consultations and cooperation on complex issues such as trans-border rivers and our trade imbalance so as to strengthen our strategic and cooperative partnership.

Four, we should maintain a high level of strategic communication and consultations, in a spirit of transparency, on our region and our periphery, eliminating misunderstanding between our two countries and building experience of positive cooperation. As the two largest countries in Asia, our strategic consultation and cooperation will enhance peace, stability and security in our region and beyond.

Five, our convergence on a broad range of global issues should lead to enhanced policy coordination on regional and global affairs and cooperation in regional and multilateral forums in the political, economic and security domains.

Six, we should harness the full potential of cooperation in all aspects of our relationship, including in the economic area.

And finally, we will achieve much greater success in our relations by increasing contacts and familiarity between our people in every walk of life.

Like a beautiful tangram that emerges from seven different shapes, these seven principles would together create a beautiful tapestry of India-China relations in the years ahead.

I am pleased that the agreements that we have signed yesterday will help to advance many of these shared principles. As officials who will determine public policy, I hope you will do everything to advance our cooperation and promote India-China relations from your positions of responsibility.

Before I conclude, let me recall what I have often said that the world is large enough to accommodate the development aspirations of both India and China.

In my meeting with President Xi yesterday, he echoed this thought when he said that the Chinese and Indian dreams for becoming strong, developed and prosperous nations are inter-connected and mutually compatible. My meetings with President Xi and Premier Li give me great confidence that we can fulfill this noble vision. More than ever before, the world needs both countries to prosper together. We were not destined to be rivals, and we should show determination to become partners. Our future should be defined by cooperation and not by confrontation. It will not be easy, but we must spare no effort.

What is at stake is the future of India and China; indeed, what may be at stake is the future of our region and our world.

I thank you for your attention."