"I am greatly honoured to address this distinguished gathering at the prestigious Chinese Academy of Social Sciences. Yours is a premier institution, which has been at China's intellectual vanguard over the last three decades and has contributed immensely to China's reform and development.

I am delighted to be in this great country. We in India admire the remarkable economic progress that China has made. The rise of China is among the most important developments of our times. As China's largest neighbour, and a friend, we cannot remain untouched by this momentous process.

The great Chinese scholar and one of the foremost Indologists of our times, Professor Ji Xianlin, has rightly said and I quote : The two great cultural circles - China and India - have always learned from and influenced each other, and this process greatly speeded the development of the two cultures, which is both history and reality, unquote.

Today, both India and China are in the midst of rapid transformation. The development agenda has taken centre-stage in both our countries. Our systems are different, but people in both countries are united in their aspiration for a better future. When countries of the size of China and India, together accounting for 2.5 billion people begin to unshackle their creative energies, it is bound to impact the whole world. The world knows it and is watching with great interest.

I therefore would like to use this opportunity to speak to you on India's development experience and on what I see as a special opportunity for India and China to work together in the twenty-first century.

Premier Wen Jiabao recently spoke in Singapore about how it was only with openness and inclusiveness that a country can become strong and prosperous. In the past few decades, China has benefited enormously from opening its economy to the rest of the world, and so has India.

India is changing and I would like to acknowledge that the success of China has been a stimulus to change. This process began in the 1980s and was intensified in 1991. In our system change can only be brought about through public debate and it takes time to build a political consensus. However, I am happy to say that in the 16 years that have elapsed since 1991, successive governments in India have carried forward the reform process, with the result that today India is on a high growth path.

Our economic growth during the last five years has averaged about 8.5% per year. This is unprecedented, and has created confidence that we can do even better. We are aiming to raise our growth rate to 10% per year in the near future. There is a palpable sense of confidence in the country and there is optimism about the future.

The Indian economy has demonstrated resilience in meeting the challenges posed by globalization. In the last two decades, our industry –especially large and medium industry– has restructured to become globally competitive. This process is continuing.

We have, over the past few years, been able to create an environment conducive to creativity and enterprise. This is symbolized by the success of our information technology sector in world markets. There are other sectors that are also emerging. Pharmaceuticals and auto-components are both highly competitive. Indian multinationals have emerged that are investing abroad. I am very happy to say that many of these companies are also investing in the great country of China.

A few weeks ago, our National Development Council, which includes the Central Government together with our States and Union Territories, approved India's Eleventh Five Year Plan covering the period 2007-2012. The Plan seeks to build further on the growth momentum already created to reach 10% growth by the year 2012. But it also recognises that growth alone cannot be the goal of a planning process.

We also need to ensure that growth is inclusive and equitable. We have to address the problems of inter-regional disparity and specifically, urban-rural disparity, revival of the agriculture sector, limited availability of land, and the lack of mobility of those employed in agriculture to productive jobs in industry. This is what we mean by inclusive growth. It is somewhat similar to what is called harmonious growth in China.

We have decided to make important structural shifts in the Plan to address the critical constraints that hold us back from achieving our objective of faster and more inclusive growth. As far as growth is concerned, the biggest priority must be the development of infrastructure, including infrastructure in rural areas. We propose to increase investment in infrastructure from 5% of GDP in 2006 to 9% by 2012 relying on both public and private investment.

Education, including skill development, is among our major priorities. We propose to triple the share of Central government spending on education and skill development from less than 8 per cent of total plan expenditure in the Tenth Plan to over 19 per cent in the Eleventh Plan. In fact, more than half of total government budgetary spending has been earmarked for agriculture, education, health and rural development, reflecting our emphasis on inclusive growth.

Sustainability of development for a country of India's size is another key concern. We need to address critical challenges relating to energy, food and water security, and climate change. These are challenges that China faces as well.

India's domestic and foreign policy priorities are closely linked. The primary task of our foreign policy is to create an external environment that is conducive for our rapid development. Our policy seeks to widen our development choices and give us strategic autonomy in the world. The independence of our foreign policy enables us to pursue mutually beneficial cooperation with all major countries of the world.

The establishment of peaceful and cooperative relationships in our neighbourhood is an intrinsic element of our foreign policy. We realise that our destinies are linked by geography and history. Both India and China seek tranquillity and stability in our immediate neighbourhood and extended region.

We recognise that the world is evolving and developing features of multipolarity. It is natural that major powers, bound together by economic interdependence, will seek to cooperate with each other to mutual benefit. India and China must be part of this cooperative framework.

I look forward with optimism to the future and the role which India and China are destined to play in the transformation of Asia and the world as well. This optimism is based on my conviction that there is enough space for both India and China to grow and prosper while strengthening our cooperative engagement. History shows that our two civilizations, flourished for centuries, side by side, interacting and influencing each other.

The Strategic and Cooperative Partnership for Peace and Prosperity that we established in 2005 seeks purposeful engagement covering a wide range of areas. At the same time, we recognise the obligation we have to put behind us disputes and problems that have troubled our relations in the past.

The boundary between us is peaceful. We are both determined to keep it so while our Special Representatives seek a settlement of the boundary question. In April 2005, during the visit of Premier Wen Jiabao to India, we agreed on a set of Political Parameters and Guiding Principles for the settlement of the boundary question. We are confident that those Principles will guide us to a mutually satisfactory solution of this issue. We have also agreed to set up a mechanism to look at trans-boundary rivers, and will make a success of its work.

We are satisfied with the results of our efforts so far and are convinced that the potential for India-China relations is great and will be realised. Where do we go from here and what is our vision for the 21st century? Yesterday, Premier Wen Jiabao and I have agreed upon our Shared Vision for the 21st Century.

The starting point is the recognition that India-China relations impinge not only on the welfare of the people of the two countries, but also influence regional and global trends.

We are at an exciting point in history when the centre of gravity of the world economy is moving towards Asia. Just as the world economy was largely about western nations in the twentieth century, it could be largely about Asia in the 21st century. By the mid-21st century, Asia may well account for more than 50 percent of trade, income, saving, investment and financial transactions of the world.

We must, therefore, ensure that India and China cooperate in creating a world of positive externalities and mutual prosperity, rather than one based on calculations of balance of power and animosity. This involves India and China working together closely to ensure a global order in which our simultaneous development will have a positive influence not only on our own economies and our people but also on the rest of the world as a whole. I would like to highlight some changed focus areas for the future.

First, we must bridge the "knowledge gap" between India and China. We need to make much more sustained effort to ensure proper awareness of each other. This not only applies to our culture and history but also to contemporary developments. We need to have more people to people contacts to remove misconceptions and prejudices. We need a broad based comprehensive dialogue at the level of intelligentsia, media, non-governmental professionals and the worlds of culture and the arts.

Second, we need to expand our cooperation in a broad range of functional sectors. This could include learning from each other's national developmental experiences. We would like to learn from China's success in the creation of physical infrastructure, strategies to provide productive employment outside the agriculture sector, and China's experience regarding poverty alleviation. Other areas for potential cooperation are science and technology, public health, education, institution building, water resource management and disaster management.

Third, we should harness our complementarities and synergies in the areas of trade and business. India's growing consumer market, skilled human resources, and software excellence together with China's own large market, its manufacturing prowess and cost competitiveness provide the platform for exponential growth in our economic ties. China is already the second largest trading partner of India. Yesterday, we agreed to set a bilateral trade target of 60 billion US dollars by the year 2010.

Asia is today more integrated than ever before in terms of trade in goods and services and investment of capital and knowledge. In the East Asian Summit and other fora, we are discussing several constructive ideas for an open inclusive economic architecture from the Indian Ocean to the Pacific. We look forward to working with China in this pursuit. I have spoken before of an Asian Economic Community and I am glad that progress is being made in that direction.

In pursuing these initiatives we will do it and we shall do it the Asian way - avoiding confrontation and building trust, confidence and consensus. It is only in an environment of peace that prosperity in Asia can be sustained. India and China have an important role to play in building peace, security and stability in the region.

At the global level, our two countries should be at the forefront of the emergence of a more democratic global order and of multilateral approaches to resolving global issues. Today's international institutions, like the UN Security Council, no longer reflect reality and must be democratised.

We have had useful experience of cooperating in the effort to bring about a successful conclusion of the Doha Development Round of the WTO negotiations, placing the development dimension the very heart as it should be. This experience enables us to intensify our efforts to create a more open and equitable trading and financial architecture world wide.

The environment is humanity's common heritage. The rights of our people to a fair chance to improve their lot cannot be abandoned because of environmental damage caused by others who followed a path which has squandered the earth's resources.

Burden sharing therefore has to be fair and must take into account historical emissions. The recently concluded Bali Conference provides a framework for future cooperation between India and China on this basis. India and China should continue to work together to strengthen international cooperation on this basis.

The rapid growth of India and China will lead to expanding demand for energy. We have no choice but to widen our options for energy availability and develop viable strategies for energy security. We can do much more to jointly develop clean and energy efficient technologies through collaborative research and development. India seeks international cooperation in the field of civilian nuclear energy, including with China.

Another area that merits our attention is food security. Global trends in food production and prices, and changing patterns of consumption are going to put increasing pressure on the availability and prices of basic food items. These trends pose major challenges for how we manage our food economy in the years that lie ahead. Our interests are common and we can learn from each other in the strategies we follow for the development of our agriculture and our economy.

Perhaps the greatest danger to our development comes from extremism of all types, whether in the garb of religion or on the pretext of righting historical wrongs. Recent developments in our neighbourhood have brought home to us again the imperative necessity to collectively fight terrorism and extremism in all its forms. As large and diverse societies, India and China are well placed to demonstrate the benefits of moderation and peaceful co-existence. The rise of non-state actors, often based on intolerance, and narrow minded conceptions of identity, is a threat to all civilized nations.

The responsibility for the further development of India-China relations is truly a shared responsibility. Our governments have an important role to play. But we must also look to you, the intellectuals, thinkers and scholars of China to lead the way by working closely with your Indian counterparts. It is through a free flow of ideas and sharing of different perspectives that our two societies can build upon the edifice of our civilisational links."