I begin by congratulating each one of you for having been selected for a very prestigious organized service in our system of government. The foreign service occupies a unique place in our system of governance and with every passage of time the importance of having a foreign service which is committed to our national objectives which has the requisite skills and motivation to carry out the task of implementing our foreign policy in diverse areas of activity - its importance is only going to grow in the years to come. We live today in an increasingly integrated, globalised world, and the growing interdependence of nations creates new challenges for the management of global economy, global polity and foreign policy is essentially a projection of our national interest abroad.

And therefore the starting point of every good foreign service training must be a thorough grounding of what are our national concerns, what are our national objectives and ever since India became independent the foremost task before our country has been to accelerate the pace of social and economic development to ensure that our economy grows at a rapid rate, that with it we can generate more wealth in our country with which we can wash away the tears from the marginalized sections of our society and in internal domestic policies have an important role to play as to what will happen to the pace of development in our country. But as I said in an increasingly interdependent world that we live in we need an external environment which is conducive to the promotion of rapid economic development in our country. And when I talk about international environment, I have in mind the fact that what happens to the world trading system impinges on our capacity to grow at a faster pace. International trade particularly in the globalised world we live in has emerged as an important engine of growth of nations. And therefore we have to create an environment with which India's trade can grow, India's economy will benefit enormously if our exports are given a level playing field if we don't face barriers to increase exports of our country and therefore what happens to the multilateral trading systems, what happens to barriers to trade, barriers of commerce, is a very important indicator of what will be the pace of development of our country.

In the same way we are now today faced with situation where there are new challenges. Never before in the history of the world capital flows have emerged as major determinant of international system. Today financial liberalization has taken roots although many countries , even our own country, maintain some controls on capital movements but as far as inward movements of capitalist concerned by and large, we have a very liberal system which encourages the import of capital. As a part of our strategy to accelerate this tempo of development we need a rapid increase of savings and investments. If we want to grow at the rate of 9 to 10 per cent we need an investment rate of 35 to 40%. The bulk of savings needed to sustain this investment have been generated domestically. And fortunately our savings rate today is as high as 35%. We invest about 37% of our GDP and we save about 35% and therefore the net capital inflow from abroad is about 2% of our GDP. It is small but it is important. It is also important because capital inflows are harbingers of transfer of technology, management skills and therefore we have been trying to create over time a congenial atmosphere for investment in our country, both for domestic capital formation as well as in our ability to attract foreign capital.

In addition to the liberalization of trade and financial services, we are today faced with new challenges. There are environmental challenges. There is the growing concern of global warming. There is a growing concern about pandemics. Disease today knows no national barriers. Avian flu can travel from one country to another and this is yet another aspect of growing inter-dependence of nations. There are problems which no nation acting alone can solve and therefore we need regional cooperation, we need multilateral cooperation to deal with this new challenges.

I mentioned global warming. The world is not a morality play. The world's political and economic system is a power play and those who have greater power use it to their advantage. And therefore those who are less powerful are always at a disadvantage. Our effort has been through collective strategies working towards with various coalitions of developing counties, sometimes with coalitions of like-minded developed countries to create an environment where power factor does not work to our disadvantage. Because even though when we recognize that the global warming is common concern. The whole world shares a single environment and therefore if the environment deteriorates if climate change becomes a reality we will also suffer. But it is also important that in devising solutions to these formidable new challenges that are on the horizon, we must protect our essential national interests. And for a poor country like ours, development and the eradication of poverty is the supreme concern. So we have to marry the concern of management of global climate with the concern for development, for removal of poverty.

Now in the international systems, there is going to be an immense pressure. And counties like India, countries like China - people are blaming them for global warming, for global food crises. Also blaming us for the rapid growth in demand of hydrocarbons as factor in the global crisis with regards to energy. All these are projections of national interests of various countries and our effort has to be that while we recognize the world is an increasingly inter-dependent entity, the management of this inter-dependence must be equitable, it must operate in a manner which will protect our national interest. These interests are that India need a long period of peaceful development to sustain the tempo of social and economic development so that over a period of time, in our lifetime, we can get rid of chronic poverty, ignorance and disease, which has been the lot of a majority of our people for centuries. There are opportunities, but there are challenges. So when we deal with global issues like managemnt of international economic system, world trading system, the management of international financial system, the world monetary system, the world system for the regulation of international flows, the how to handle issues like climate change, how to handle issues like growth of pandemics and how nations of the world can cooperate in research and development. An early warning system is also need to deal with challenges like Tsunami. In this one world that we live in, interdependence of nations is a fact. Peace and prosperity are indivisible. But as Jawaharlal Nehru said as early as 1947 in his famous speech on midnight of 15th of August, disaster is also an indication of interdependence. This is also indivisible, and therefore though there are new challenges our effort has to be that in dealing with them India's national interest must be protected to the fullest possible extent. And that is where the foreign service comes in and therefore your awareness for national concerns and how best we can achieve our objectives in an increasingly interdependent world that we live in is the biggest single challenge facing our foreign policy establishment.

There are other areas - the growing menace of terrorism. Until 9-11 the world probably did not pay as much attention to the fact that countries like India have been the victim of terror for the last 20-25 years. After 9-11 the world situation has canged, and has changed to a certain degree to our advantage. But terrorism today is an international phenomenon, that there are still states who are sometimes actively backing the terrorist elements, and that there is a growing importance of the non-state actors in areas relating to terror. I think this gives our national security a new dimension. Also there is a growing fear that the security of nations can be threatened by nuclear weapons and sensitive technologies falling into the hands of terrorist elements. All this we have to conscious of, we have to handle our approach to dealing with these global issues in a manner which will project and protect our national interest.

What we have been trying to do is to create an international environment conducive to the achievement of our national goals of sustained economic and social development. We need a peaceful neighborhood. And that is why it is very important that our relations with our neighbours whether they are China, Pakistan, Bangla Desh, Nepal, Sri Lanka- they are of critical importance in realizing our national ambitions. With regard to China we have this whole problem of the border. We have in the last four years actively engaged through our special representatives to find pragmatic pathways to handle this complicated issue. Some progress is being made but I think there is a long arduous journey ahead of us. In the meanwhile both the Chinese and our government have appreciated that we cannot allow the border dispute to affect the pace of cooperation in other areas and that is why our trade with China has grown at a handsome rate. There is a scope for further expansion of trade and cultural relations.

The soft power of India in some ways can be a very important instrument of foreign policy. Cultural relations, India's film industry- Bolly-wood I find wherever I go in Middle-East, in Africa - people talk about Indian films. So that is a new way of influencing of world about the growing importance of India. Soft power is equally important in the new world of diplomacy.

With our neighbours - particularly with neighbours like Bangladesh, Sri Lanka, Nepal - we have a vested interest in their stability, in their progress because if they do not progress many of their problems can become our problems. If Bangladesh suffers from global warming, I think a large number of people will willy-nilly migrate, legally or illegally, into our country. India and Nepal have a very porous border and if the Nepali system does not provide adequate opportunity to Nepali youths - willy-nilly there will be migration. In the same way, there is a conflict in Sri Lanka, tragic though it is, it has given a lot of worries because many times it happens that when ethnic tensions increase, there is a tendency of increased inflow of refugees in our country and this creates both domestic problems as well as foreign policy problems. So our relations with our neighbours is of critical importance. In some ways the most aspect of our foreign policy is our management of our relations with our neighbours. I would encourage each one of you to take a lot more interest in our neighbourhood. We know a great deal of what goes on in the West - in Europe, in America. But we don't know adequately enough of what goes on in our neighbourhood. And many a times our own thinking about these countries is influenced excessively by western perceptions of what is going on in these countries. I would like our diplomats to develop and Indian perspective on what is happening in our neighbourhood and use it as an important analytical tool for, I think, telling us what are the meaningful foreign policy and domestic policy options before us in dealing with the neighbouring countries.

But in the world in which science and technology have created a situation where distances have lost their old significant, the concept of neighbourhood is no longer the immediate neighbourhood that we know of. And that is why in the last 15-20 years , we have been trying to look East-ward to South-east Asia, to East Asia. This is where in the last 20 years there has been the most rapid economic and social growth. And that is why we are trying to work very closely to find new avenues of cooperation between India and the ASEAN countries. Also we are trying to expand our cooperation with other countries of East Asia. We have now an East Asia summit in which we are partners, which consists of Asean and three countries. It meets every year and discusses issues which have growing importance for the future of East Asia as a whole. The aspiration is, which we are projecting, that we all should work towards a flourishing East Asian community which will give new meaning to our inter-dependence with countries of South East Asia and East Asia.

At the same time the countries of West Asia are also of great importance. Those of you who have studied economics, our balance of payments depends a great deal from the flow of remittances of Indian workers - a large part of these comes from Middle East. We have about five million Indian citizens working in these countries and their earnings are very important for our balance of payments. And therefore the peace and prosperity in East Asia and the Gulf countries is of equal importance to us. Not only for that reason but also because the concerns with energy security is now assuming a new dimension. Since the 1970s when the world woke in 1973 that the world of cheap oil was dead and gone - there has been several phases of crises in the management of hydrocarbon economy. We now have a similar situation whereby the price of hydrocarbons, particularly petroleum products, have quadrupled in the last two years. This has created new problems. The world is not able to grapple that the crises that it faces. In the last three or four years, the average production of crude oil in the world has been about 85 million barrels a day. The demand is increasing faster than ever before and the quest for access to the oil resources is going to become another major factor of power play in the world. The Chinese have seized the opportunities and have been going around the world in Africa, in Latin America, investing and exploring and developing the natural resources for increased oil production - this tension will increase in the years to come. So the quest for sensitive natural resources, oil security, energy security will emerge as a major source of interplay of forces in the evolving world economy.

Now competition and cooperation have to be the watchwords. We have to cooperate but have also to recognize that there will be increasing competition from China, from other countries and also those who are in entrenched would not like to make way for others - the new comers. So therefore tensions will be a part of the evolving world systems and how we handle our problems, how we project our national interests, will be a crucial determinant of our capacity to be successful in the race for development.

For us Europe and United States matter a great deal because our trade and capital flows have a very large element coming from these countries. And that is why we were the first country who recognized the great important of European integration. So when the European economy community came to existence, India was one of the first few developing countries to establish diplomatic relations. Now the European integration process has gained new momentum and it has potential for good and it has potential to create new tensions. And therefore our effort has been to find new way of working together with the European Union - we are trying to negotiate a broad base trade and investment agreement to use the resources of Europe to promote our development objective. The process has been on for last three or four years and we have made progress but we have to concentrate a lot more.

In recent years our government has sought a new dimension to our relationship with the United States in the form of a nuclear deal. I don't want to talk a great deal about it. But I think it is for the first time we got the US to appreciate that India is a nuclear weapons state, that India has the right to develop nuclear power to protect it's strategic interests, and that it is a decision that must be made by the people of India not subject to any international supervision or any international interference. And despite the fact that we are not a signatory to the NPT, and we have also said that if the CTBT came into being we will not sign it, there is no pressure from the US on India to sign the NPT or any other international arrangement of that sort to enter into nuclear cooperation for civil energy. So as I see it this nuclear agreement that we signed with the US it has run into some difficulties, but it protects our national interest, it protects our capacity to use the nuclear power to protect our strategic interests. At the same time it opens us new opportunities for civilian cooperation and without that, I think, the trade in dual technologies - sensitive advanced technologies - can not become a reality. But our domestic politics has prevented us from going ahead, I still continued to hope that we will make progress in the months that lie ahead. But it is very important for us to move forward to end this nuclear apartheid that the world has sought to impose on India. This agreement, if it materializes, if it sees the light of day, it will open up new possibilities of cooperation, not only with the US but all other nuclear powers like Russia, France, who are very keen that once we have this deal through, that India should become eligible for civil nuclear cooperation.

These are some of the areas where I would shared my thoughts with you. All I can say is that you have an exciting career ahead of you. The service of India is the service of teeming millions of our people. You are privileged that you have this unique opportunity to be instruments for implementing our national vision, our national objectives, our national goal in the field of foreign policies. With these words, I once again congratulate you for being selected for this prestigious service of our country.