I am delighted to be here at your Annual General Meeting where the theme is "India's Promise in the Asian Century." Some of you were with me recently at Kuala Lumpur where India's re-connection with Asia was a highlight of the East Asia Summit. I do believe that the 21st century will be an Asian century and India must have a major role in making it happen.

I have a vision of Asia in which India has to play a key role - a vision of a resurgent Asia; an Asia of inclusive societies and open markets; an Asia of enterprise and creativity, driven by knowledge and shaped by family values; an Asia of peace, stability and development; a modern, secular and prosperous Asia. I had stated that our long-term goal should be the creation of a harmonious and prosperous community which is a seamlessly integrated market for goods, services and investments; a community which pools its enormous resources to tackle common challenges. This community must be one which goes beyond just cooperation to having a robust institutional architecture which forms the basis for regional cooperation and action. I urged other nations to seize the opportunity with foresight and wisdom.

As I see it, a virtual Asian Economic Community is emerging. I outlined a vision of a Pan Asian Free Trade Agreement as a starting block which could be the third pole of the world economy after the European Union and NAFTA. I visualize a situation where our markets become common, where goods, services, investments, ideas, technology and people move unhindered between countries. In order to realize this vision of an East Asian Community centred around a common market, we need new institutions that can manage the economic integration processes, build the essential infrastructural links, which can harmonise standards, legal regimes, financial and monetary policies and regulatory frameworks. These institutions must form the foundation on which people to people contacts blossom and a shared sense of identity and destiny develops in the region. India has a major role in making this happen as it is for our benefit as well.

Ladies and Gentlemen,

To make this happen sooner, rather than later, there is much we need to do here, at home in India. For us to play our due role in Asia, and in the world, we must forge ahead as a modern industrial and knowledge economy. India was among the early industrialisers in Asia. Over the years, we have slipped behind. It is essential that we catch up fast.

Today, as we meet here, I believe the state of business confidence and expectations is indeed very positive. During my recent interactions with business representatives, I have been encouraged by the new sense of confidence that many now exude. It is, therefore, heartening to see the faith being reposed in the prospects for the Indian economy - not only within India but outside. The Indian economy needs a massive dose of investment in the foreseeable future. We need investment in every conceivable area. The decade ahead of us must be a decade of investment. This investment should convert India into a first rate agricultural, industrial and service economy.

At the core of this is transformation is manufacturing. An economy of our size and scope cannot ignore the manufacturing sector. A modern manufacturing sector is also essential for the development of our scientific and technological base, for the growth of our knowledge economy and for our national security. I am concerned that the share of manufacturing in national income has shown only a marginal improvement from 15.8% in 1991 to 17% in 2003. This should be somewhere in the range of 25% to 35%. This requires manufacturing to keep growing at 12% - 14% in the next decade.

Inadequate growth in manufacturing has had its adverse impact on employment generation. The current mismatch between distribution of workforce and value added in agriculture is one of the main reasons for the large number of poor. This needs urgent correction. Manufacturing has to be the sponge which absorbs people who need to move out of agriculture in pursuit of higher incomes. I do not accept the proposition that India can skip the manufacturing stage of development and go from being an agrarian society directly to becoming a services and knowledge-based society. This is a mistaken view. A substantial manufacturing base is essential to absorb the workforce and ensure sustainable growth of the economy.

Opportunities are knocking at our doors and it is for industry to exploit these. We can be a player in the world league in agro-processing, in textiles and garments, in automobiles and components, in pharmaceuticals, in chemicals and petrochemicals and in leather and footwear. We can target to process over 25% of our agricultural produce in five years as compared to a lowly 2% today. This will generate jobs, reduce wastage and enhance rural incomes. The end of the MFA regime in textiles must translate into greater output and far more jobs in textiles and garments. Reports are mixed about the results in textiles this year. We cannot miss the opportunities which we once did in the 1960s. I urge industry to have faith and take the plunge. Few will regret.

Even though our own home market is large and set to grow larger, Indian firms must seek to be globally competitive. Of course, even in the most modern and open economies there is ample space for small and medium enterprises. I do believe that we will see greater competitiveness in our small and medium enterprise sector in coming years. But large firms in large scale industries must think global, even as they act local. I am happy when I see Indian firms venturing out to conquer new vistas outside the country - be it for sales or for production.

Ladies and Gentlemen,

How we deal with the challenge of globalization and how we make use of its opportunities will shape our relations with the world, and the perception of our capabilities as a nation. I do believe that this has already happened in substantial measure. The enlargement of trade would benefit all countries and we have to understand the importance of business and commerce in our strategic partnership with other countries.

I assure you that our Government will be mindful of the interests of domestic industry even as we enable our economy to integrate itself with the global economy.

I find that when we talk of integrating markets, many of our business and political leaders only look at the threat of competition from imports and not at the opportunity of accessing new markets through exports. If we look at new opportunities the old threats become less daunting. I urge Indian industry to adopt a forward-looking approach in preparing for the brave new world of competition.

Ladies and Gentlemen,

Our Government is committed to unleashing a new surge of investment in all these areas by encouraging enterprise and creativity, by reforming the public sector and by enabling private-public partnerships. If it requires modifications to our labour policies to provide greater flexibility which in turn will generate more jobs, we will work with all stakeholders to generate a consensus on this. We will also need to pay attention to social safety nets because it is incumbent on the state to take care of the weak and vulnerable, for those who cannot bear the shocks of a market economy. Social welfare legislation must go hand in hand in with labour market flexibility. This will help increase employment opportunities while taking care of employees' concerns.

Many of you have concerns about our tax system. Over the last two years, we have moved towards lower tariffs, uniform tax rates and easier procedures. There are still some concerns. I promise to address these concerns over the next year. We will also work to improve the tax administration in the country so that your interface with the tax system is pleasant, smooth, problem free and conducive to easy tax compliance. A lot of progress has been made in introducing VAT. I am happy to note that many states which initially kept out of VAT have opted to join the system. And revenues have been buoyant setting at rest worries about its feasibility. Based on this experience, we need to move towards greater rationalization of VAT and CENVAT rates, and most importantly, towards a common goods and service tax. This would enable, in the final analysis, India into becoming a genuine common market, a dream of our founding fathers. I hope to see this happen in the next 3-4 years, an event which will be a landmark in our economic development.

Ladies and Gentlemen,

We have been giving high priority to infrastructure development so that it does not choke growth. I believe that the basic institutional framework for a surge in infrastructure investment is now in place with an SPV for infrastructure investment, a viability gap funding programme, a separate approval procedure for PPP projects and Model Concession Agreements. Transparent competitive systems are in place and are paying off. We inherited a Golden Quadrilateral being built with the old contracting approach. We are now into an expanded highways programme with an investment plan of Rs. 175,000 crores. The entire Golden Quadrilateral is being six-laned and against a target of 30 BOT projects this year, we have awarded 31 projects. Compared to a high of 3,500 kms contracted in 2001-02, we have contracted over 6,000 km this year. And I must admit, I wish to aim for an even higher pace.

Feasibility studies for dedicated freight corridors on the Delhi-Mumbai and the Delhi-Kolkata routes are nearing completion. We will be shortly setting a new firm to implement these corridors in addition to allowing private container trains on railway routes. Our investment plans in ports exceed Rs 60,000 crores and over Rs 40,000 crores in airports.

I am aware that the power sector is still a source of concern. We have put an important policy regime in place but the key is to improve distribution systems, cut thefts and losses, have competitive supplies and better revenue collection mechanisms - all of which will generate greater investment, both private and public - in generation. Some steps are already being taken to remove fuel constraints, increase captive coal production, having mega coast based power projects and improving operations of power plants. However, there are limits to what the central government can do in this regard. Many of the steps are to be taken by state governments. I urge our Chief Ministers to take the leadership role and initiate power sector reforms at the State level.

The VAT process, where reform was steered by an empowered committee of State finance ministers has worked well, even though it took some time to arrive at a consensus. I hope we can initiate a speedier process in the case of power sector policy reform through the mechanism of an Empowered Committee of Chief Ministers. I am going to propose to our Chief Ministers to forge a similar all-party consensus in the power sector.

Ladies and Gentlemen,

I have great faith in the ability of Indian industry and enterprise in facing competition. I am acutely aware of your frequent demand for a "level playing field". Our Government will certainly ensure that Indian industry is empowered to face global competition. We are committed to building world class infrastructure. We will ensure that our fiscal and other policies do not blunt the edge of your competitiveness. However, it must be recognized that in business, as in life and in nature, playing fields are never really level. The challenge before Indian business is no different from the challenge before any student, professional or sportsperson.

To brace up to the challenge of competition even when the playing fields are uneven.

It is not as if Indian enterprise has not faced that challenge or not emerged successfully from a battle between unequals. The secret of enterprise and creativity lies in being able to score on uneven playing fields. There is no denying that in many areas Indian enterprise does have a comparative advantage. An experienced work force, a large pool of scientists, engineers and managers, a reasonable endowment of natural resources and a large domestic market give us a headstart over others in manufacturing. Estimates of Revealed Comparative Advantage show that India's manufacturing exports across this entire range are globally competitive. We need to build on this base and expand our competitiveness further.

These advantages can enhance productivity if firms pursue appropriate strategies. Innovation is the driver of productivity. Productivity gains in turn ensure economic growth as well as a higher standard of living. Rising productivity would help provide goods at lower costs, improve the purchasing power of the common man, and accelerate domestic demand. Competitiveness is central to robust growth of the manufacturing sector. In turn the manufacturing sector is crucial, directly or indirectly, for the overall growth of the economy as well as for providing jobs to the large work force entering the job market every year.

Our Government's commitment to the growth of the manufacturing sector was demonstrated when we set up the National Manufacturing Competitiveness Council.

I am happy that the Council has come forward with a draft National Strategy that has been discussed by FICCI, among other stakeholders. The concerned Ministries and Departments have been advised to follow up on these recommendations. I hope the National Competitiveness Programme announced by our Government, to support small and medium enterprises in particular, will enable this. The National Manufacturing Competitiveness Council, along with the Ministry for Industries, is in the process of finalizing the scheme in consultation with stakeholders.

This scheme, once put in operation, could help in improving the competitiveness of Indian firms.

Ladies and Gentlemen,

I can assure you that we will continue to do whatever is needed to remove the constraints on domestic enterprise. We are in exciting times. We are on the threshold of the Asian Century. On the threshold of a new era. We will work with you, and walk with you in this journey of creativity and enterprise. I wish your AGM all success.