India Economic Policy Conference

- It's my pleasure to introduce Dr. Smarin, who's the Chief Economic Advisor to the government of India and Professor Raam Raja, who is the Harold McGraw, the third foundation senior fellow at the Hoover Institution, and the Catherine Dack Miller, a distinguished service professor of finance at the University of Chicago's Booth School of Business. Without any further ado, I will turn the floor over to my colleague, professor Raja.

- Thank you. Thank you very much, Sumit, and thanks a for doing this. I mean, I have some inkling of your job. It's, it's a tough one, and it's, it's key to understanding what's going on in India and, and pushing it in the right direction. You offered the view of a philosopher and guide for the economy through your economic report every year. So let, let me start with the short term, the current conjun. How do you characterize the Indian economy at this point? What's, what's going right and what are things that you worry about?

- Thanks. Thanks, Ragu. First of all, happy to share the stage with you, and for those of you who are not aware, when Ragu said he has an inkling of what my job involves, UMMA, you may remember that before he became the RBA governor, he served for a year as Chief economic advisor. So, so he really has more than an inkling of what this job entails. But I mean, to come to your question, Ragu, couple of months ago when the, the US administration imposed the second round of penal tariffs in India, it looked quite, first of all, it was very unexpected and therefore it came as a sort of a shock to not only policy makers, but the public as well. And therefore, there was a lot of talk of, you know, GDP growth being closer to six rather than closer to seven, et cetera. That kind of conversation was pretty rife at that time, but now, two months or three months later, rather, I would say it is, it feels like that much more clearer that it hasn't had the kind of adverse impact we feared it would have. Now, the, the GST goods and services tax reforms were sort of very fortuitously timed, although they were in the making for about a year or so, if not longer. And I think the good mon zones and rural demand are helping, and the not to leave out the direct tax relief that was given in the budget on February 1st. So, and then you, you sort of throw in the fact that inflation is such an unprecedentedly low level, particularly food inflation. You have a sort of a trifecta of a positive impact on disposable incomes, direct tax, indirect tax, and low inflation otherwise. And then I can add the fact that energy prices have been well-behaved in general and the central bank has also been doing some both liquidity and regulatory actions. So sort of you're throwing all this into the mix. I think we are looking at a growth rate of around 7% in real terms this year. And the momentum looks like at the moment will carry forward into 26, 27. So that's what, and this is all coming on top of overall macroeconomic stability. That has been a distinguishing feature of the Indian economy post COVID. You know, when, when fiscal deficit hit 9.2% at the union government level back in 2021, very few probably gave a chance to the government to bring it down to four and a half percent of GDP in five years as was promised at the time. But we are there, I think this year we will be able to meet the 4.4% number. And that has contributed in a big way. I think that's kind of underappreciated because 10 years ago, the 10 year borrowing cost for government of India was 9.5%. Now we a 6.5%. So all these things are making me feel in the short term, relatively sanguine. If you look at the macroeconomic dashboard or the health card, I think it most, in most parameters that we would normally look at, they are not even flashing amber at the moment. But that is not to, you know, to realize the medium term challenges, but I'm talking in the short term.

- Absolutely. So, so macroeconomically speaking,

- Yeah,

- Things have gone reasonably well, the, the high level of fiscal discipline after the pandemic.

- Yeah.

- The fact that inflation now is, is really nothing to speak of, right? Yeah, it's well and truly in the, in, in, in, in the target zone, perhaps even on the lower side.

- I, I mean, I mean current numbers are like Japan Japanese numbers, that's 0.25% the headline CPI inflation rate for the month of October year on year.

- Right.

- So that sounds more like a

- Yeah, but

- Deflation term, but that's something that's, there's

- A, there's a related sort

- Of

- Problem from having too low inflation, which is your nominal GDP growth doesn't go as much, and then your tax revenues don't grow as much. So that, that's a concern,

- I think. So that is, hopefully that's a transient phenomena because some of it comes through the global commodity prices being on the lowest side, and hopefully let's say next year we will be able to hit double digit nominal GDP. But I agree with you that it's, that is a downside to that. Yeah.

- So let me just clarify one thing, and then you mentioned GST reform, not everybody here is, is familiar fully cognizant of what's, what, what happened in the GST reform?

- First of all, we started out with four different goods and services tax rates. Back in 2017, the top rate was 28%. I mean, if you include zero, it becomes five as well. So now they were dropped to two, five and 18. That is sort of a higher rate of 40%, but that's for very few handful of items, mostly sin goods as they call it. And bulk of those items, which were earlier attracting 28%, they are moved to, you know, 12 and those who are at 18 have moved to five, et cetera. So we have really, not only the number of slabs have been eliminated, but most of the goods have moved into the lower rate category as well. So that is the,

- And what's your sense on the effect on tax revenues? Is it

- That's right.

- Largely neutral.

- In fact, if you fall back on the last eight years of GST history, what we have noticed is that every time the GST rates were lower and they have been coming down, the revenue impact has been surprisingly positive. So it's been always, every time the rates were dropped, then there would be a static analysis telling us the monthly collections would be lower going forward. But actual numbers have turned out to be far better because there have been greater consumption. So in, in some sense, the so-called Laffer curve is paid out on the indirect taxes side.

- Right. Is this, is this greater production and consumption as you

- Yeah.

- Indicated or is it greater compliance or,

- Or think compliance

- Is minimal.

- It's difficult for me to sort of isolate the effect of the two, and I think both have played their part

- As well.

- Yeah.

- So let's get to the, you mentioned tariffs were a unpleasant surprise. So one, what is the state of play on the tariff discussion as far as we are allowed to talk about it? And the second is is, you know, before India started purchasing Russian oil in the, in 2022, it was about 2% of our total oil consumption as I understand it. And now it has increased to a substantial amount if it is such a big, so what is the, what is the issue with Russian oil? Does India still need to use it? Can it dial back? What effect does that have in global commodity prices, et cetera? Just, just,

- No, I mean, sort of a layered question. So when we started increasing our purchase of Russian oil, we should also remember that many other earlier sources of crude were also no longer available, whether it's when Israelian crude or Iranian crude, et cetera. And then we were also told, as has been made clear by many of my colleagues in the government that you need to do this, otherwise oil prices will rise globally and that will have implications for our economy. That was global economy that was coming out of two years of inflation shock from 2022.

- When, when you say to told by the us

- Sorry. Yeah,

- Yeah,

- Yeah. So, so that was also part of the reason, and I think now what we are seeing is that is some sort of a rebalancing that's happening naturally. But we should also remember that unlike in the case of Iranian Venezuelan crude, Russian crude oil per se is not sanctioned. So purchasing Russian crude oil isn't a sanctions violating action. So only a couple of companies have been sanctioned now lately. So in that sense, purchasing Russian code is a legitimate, legitimate activity. But in terms of international sanctions law, but obviously to the extent that getting them across to India has been made more and more difficult through multiple levels of sanctions on shipping, on oil companies, et cetera, it's become more and more difficult as well. But now what would it do to the global oil price if India were to rebalance as it is doing? I don't think it is going to have a significant impact because after six to eight months of consecutive monthly production increases by OPEC countries, I think we are flash with the supplies. So I don't think it'll make a big difference if India had to rebalance. And I think that's happening, That's beginning to happen.

- So India is cutting back.

- Yes. I mean I could see that from the, from the data that there is a sort of a rebalancing that's happening.

- Mm. Yeah. What about trade the tariffs and how are those discussions going?

- Well, I mean, look, I don't have a crystal ball and I, the last several months, there have been many occasions in which we thought we were close to striking a deal with this administration, but they have turned out to be elusive. So it's difficult for me to sort of give you a timeline on it at this point. And I think it's kind of reasonably clear that it isn't anymore about specific tariff lines or tariff issues. It's really more geopolitical in nature rather than a trade related areas of disagreement that still remain to be ironed out. So I don't think so that's why that's becoming more difficult to predict. The timing is becoming more difficult. If it were only a trade related issue, then it can be ironed out through a couple of rounds of conversations. That doesn't seem to be the case. So

- The, in your sense, there is no stumbling block on the trade

- Side as, as far as I know, as far as I understand from my colleagues in the system, there isn't one.

- Yeah. Okay. So, you know, let's turn a little bit to the medium term issues then we'll turn to the really long term issues. You know, one of the big concerns in the data is a still tepid corporate investment. There are investment announcements and keep coming, but the realization of those investments tends to be a little delayed. And, and so far we haven't seen the evidence on the ground that it's stepping up or maybe you have, what's your sense of corporate

- Investment? Yeah, actually there, I would like to sort of say that what happened in 20 23, 24 has stuck in people's minds that the corporate sector has not been investing. But if you really look at the data post COVID the following year, 20, 21, 22, where actually a natural sort of bounce back from a very low level. So that was a good year for corporate investment. 22, 23 was pretty all right. It was 23, 24 that turned out to be a disappointment in terms of the private sector capital formation. And that kind of sort of left an impression, deeper impression than it should have. And there is, but actually if you look at 24, 25 data based on bottom up corporate annual reports, as of now, the indication seems to be that they really stepped up to the plate in, in the last financial year. And the numbers are pretty good, at least based on some 1700 companies, which have already filed their annual reports. It's about 12.1 trillion rupees, far higher than the government's own CapEx of 10.5 trillion rupees capital expenditure of 10.5 trillion rupees. So it was a pretty good number. And this year, despite the uncertainties we face, the trend seems to be pretty good. Now, putting all these together, we are at a gross fixed capital formation rate of around 31 30 2% of GDP, which I think under the circumstances, I think that's all right. I mean, I I to expect that India would be able to go to 35 to 37% as we experienced between oh three and oh eight, I don't think that's realistic in this world. And it probably may even be unnecessary.

- It may have been excessive then,

- Then Exactly. And I, therefore I am, I feel that we are pretty doing, we are doing pretty all right between public and private sector in terms of capital formation.

- Now, one of the things you will see in India when you go there is, is the extreme, extremely high level of public investment that seems to be, that's right. Because that's visible and in every big city you'll see a metro coming up. When is this excessive?

- It's take a long time for us to say it's, it'll be excessive because given the fact that you are at $2,700 per capita and you have these needs, I I, I really think that's probably not one of those things that keep me up at night at this point.

- So then public investment coupled with sort of the allied private investment. Yeah, especially in construction.

- Yeah.

- Could take Indian growth a long way.

- I think so. I I, I do think for the next decade or so that it, i I I wouldn't worry about the excess investment part for now. Yeah.

- So one of your economic surveys, I think your 2024 economic survey made a very, very important case for less is more, less government intervention, more let the private sector run something, which should be sort of very welcome in these, which is very welcome In these halls, one of the consequences as I understand, was a committee was set up to make doing business easier in India. What's, what's the status of that? How's it going?

- So actually the precursor to what I wrote in the economic survey, which was published in January, 2025, I though, although I did touch upon in 2024 July after the elections, but the, I, I took it up as a bigger piece in, in this year's economic survey, but before even the committee was appointed just badly a few months ago to look at what's happening in the union government on regulations, but somewhat quietly in February itself, we began an exercise to do this with respect to states. And that I can tell you has been a, I mean, has been a pretty decent success. There is good appetite and we gave them a list of 24 areas, not that they were very deep deregulation ex efforts, but it's more to wet the appetite and we will be presenting sort of a dashboard of how many states did how much.

- Yeah.

- And the, the dashboard looks more green than blank In terms of the states completing the exercises. And more recently, even some of the relatively taboo areas such as land use conversion, umh government has made it pretty much automatic in many places. That's huge. And then just last night or the day before, I think Theh government has done a lot to liberalize working conditions and the third shift for women and removing the artificial legal restrictions on some areas being considered too hazardous or risky for women to work, et cetera. The UP government has very system, very comprehensively liberalized it that came up last night or the night before. So I think states are doing it with far more enthusiasm than we anticipated. So that's a bigger story. But the union government, it is still in, in work in progress, although the ease of doing business deregulation have been happening since the first term of the Modi government in 2014. But I think there is a understanding now that it needs to sort of go deeper.

- Yeah. - And I hope that currently whatever exercises that are currently underway, when the recommendations are given, I, I hope the ministries will take them up as, as well as state governments have been doing.

- I mean, one of the worries of the trying to tackle the doing business was the World Bank had a specific set of indicators and then people sort of focused on those

- Specific

- Indicators. It was gaming the system and it wasn't clear that just fixing those indicators would, would fix the problem.

- Fair enough. Fair. But I mean, I think given where we were starting anywhere would've been still welcome. So at at least

- The, the message that we need to

- Yeah,

- Reduce the red tape was, was important. But I think this idea of getting best practices in states to be shared and to be

- Taken forward, that is, that is happening now. And I think that's a good thing. In fact, I'm, lately I'm given, I'm, I'm trying to reframe this entire ease of doing business as sort of ease of being honest because, you know, what are rules, regulations and compliance have done in the last 70, 75, 78 years since independence have been to make it costlier for Indian public and businesses, to be honest.

- Yeah.

- And why that framing is reframing is necessary in my view, is that the moment you sort of make it easier to be honest than you build trust and trust leads to scale and scalability? I think so my, I I sort of now started calling it more about ease of being honest than ease of doing business.

- I, I think that makes sense. Yeah. Sometimes the real problem is you don't know what the regulation is. There are so many regulations at different times. Some have been repeated, some have not. In the RPI, we had this rule that you had to put everything into a master document.

- Yeah. I think that is something, and what was not in the master document

- Was not a regulation.

- No, no. I think what RBA data is so very good template for the governments to adopt or in Greece. Yeah.

- Right. And, and you could do it on, you know, how do you open a restaurant? Here are the things you gotta do. Yeah. Here are the 10 15 and then you'll see how onerous some of it is exactly. So that you can actually eliminate Exactly turning to foreign direct investment. That too has been an area where India wants more, even with the China plus one story, it's sort of perhaps less than we desire. What's the constraint?

- Yeah, the picture is slightly more mixed than what headline numbers. Looking at net FDI would indicate, because first of all, gross numbers were have held up by and large, which is basically a combination of inflows and retained profits of the multinationals. But what happened in the last two, three years is that the net FDI numbers were lower and they were trending lower as well. And that has got a lot to do with the fact that the public markets in India were performing extremely well. And there was, there were a lot of profits to take. I mean, for example, I'll just give you one figure. Hyundai India's IPO, the market cap of the Indian subsidiary itself on listing was 45% of the market cap of the parent company. So why would any investor leave that kind of money on the table? And therefore there was a lot of in cashing and change of ownership of hands from private foreign investors to Indian institutional investors, whether they are overseas or Indian. So basically that kind of made the net numbers look a lot weaker than they were. But in terms of sentiments, there wasn't any waning of sentiment as far as I could see in conversations or in surveys of looking at India as an investment destination. But luckily I feel that there's even this negative trend in net FDI probably reached its flow last year because if you look at RBI's data for the first five months of the current financial year, the net FDI numbers are looking a lot healthier than they did in the previous two years. So I hope that we found the floor last year from that.

- Well, you, you're sort of saying one of the strengths of the recent years, which has been the greater involvement of the Indian population in the equity markets.

- That's right.

- Which earlier was dominated by foreign investors.

- Investors. Yeah. That is one of the reasons why I think, although in the last one year, the Indian public markets have kind of underperformed, but it hasn't really created and, and despite the fact that there's been a significant net outflow of foreign institutional money, and that's largely because of the sort of offsetting inflows from domestic, both retail and institutional,

- And which in the longer run, you know, is a good thing. Equity market's a big source of returns for the domestic population. Yeah. It's a good thing. Yeah. And that's, that's, that's a good thing. So what can you tell us about the China plus one story in India? Is it

- Alive? Oh, it's still very much alive. In fact, now I think the, it's obviously everybody talks about the success story of smartphone manufacturing moving, but I think it's also happening in a few other areas in terms of toys. And although it may not look still big enough or significant enough on APIs for pharma, there is some sort of alaw back of market share that's happening. But more importantly, I think it is regardless of the governments driving them now, I think in our conversations with, despite the tariffs when we tried to meet US companies located in India and talk to and European ones, the China plus one has a larger or a longer timeframe than how we are used to measuring the success. So I think it's, it is a, it is a process and I, from my conversations tell me that it is, it'll continue.

- What, what can you tell us about, say the state of apple's sort of investments in India? Have they upgraded the technology? Are they moving up?

- I what's happen? Yeah, sorry. What's happening is that I think the value addition in the Indian manufactured phones is increasing. It was digits in the first few years. Now it is in high double digits and some more components are now being made inside the country and two huge by Indian standards, huge factories. One year Bangalore airport and one in Shri near Chennai capable of housing a hundred thousand workers is being put up by Apple. One in China and one in near Bangalore. So I think that is one story Just for Apple work. Just for Apple. Yeah, just apple. So that story is, touch wood is, is making progress and growing in size as well. Of course we have the situation where the fentanyl tariff on China has been dropped from 20 to 10, and if it goes from 10 to zero, then in a way that becomes a good structural driver for India to look at more of the inverted duty structures because the fentanyl tariff did give a certain competitive cushion and that's now halved. It can go to zero then I think even the smartphone will have to, will become relatively coster. So that is an area of urgent attention.

- Mm. - So we can't assume that the 10% will remain. Right. So that in a way it's a good thing. Yeah,

- There was a lot, there was some talk earlier that India was hostile to Chinese investment and that Chinese engineers were, were finding it hard to get visas to come to India. More recently, it's flipped the other way that India's favorable to Chinese investment, but the Chinese aren't allowing their engineers to come to India because they don't want Yeah. To be displaced. What's the, what's the reality here?

- No, I think it's probably still the case of both sides feeling the way around the problem and not having enough trust to make that a better story than what it is. You know, I think the visa situation is somewhat better, but I think China is also from some of the readings that you get from the Ministry of External Affairs, they, in India, they translate Chinese language newspapers and send us what is what the commentary there in India about India. It's very interesting. I think they feel that we shouldn't do to India what the west allowed us to do, sort of to grow at their expense. So we shouldn't be repeating the same mistake. It is the kind of commentary that I read in, in Chinese newspapers, which are sent to us by the ministry translated versions. So I think they are not going to send us the investments that we think are absolutely critical to us. They may do so in non-critical areas. So how far that would be happening. So we would rather look at some of the foreign manufacturers located in China and exporting to the world and exporting to India from there and attract them to relocate to India and use India as the base. I think that's a more fruitful avenue than to attract Chinese manufacturers from China, which is gonna be more difficult.

- Right. So two concerns foreign firms sometimes say about investing in India apart from the, you know, red tape, which we talked about is the one, the uncertainty about taxes and the second the uncertainty about regulations, especially when they're competing against big Indian houses. What's your sense of both those?

- No, I think, again, as you know, we have the sort of distinguish between the stock and the flow as stock. I think both issues are relevant, but as the flow issue, I think both are becoming better in terms of taxes. I think the key issues we hear whenever we speak to the foreign investors are two or three things. One is advanced pricing agreements and then the safe harbor limits and transfer pricing rules and of course stability of the policy. So that is a lot of that, that is a lot of merit or truth to attending to those issues. And it's also the interpretation at the field level. So if the laws are not drafted well then it gives a huge scope for different interpretation depending on the jurisdiction. So I think that is an area and that needs to be attended to. I think in terms of where that there is a sort of a domestic versus foreign favoritism, et cetera. I I I, I don't think it is particularly sensitive or unique to India than it is for many other countries. I think it's an issue that all countries are grappling with in the, in a fragmented situation. So I'm not sure that it is a binding constraint.

- Okay. Let me go now to the long term. We sort of flirted with it, but I mean the biggest issue that seems to be discussed in elections or debated is jobs. Where are the jobs gonna come from?

- So currently I think the job creation missionary is working well, but it is the income generation that is more of a challenge. I think if I look at the numbers last couple of years, whether it is the data that SO'S Ministry of Statistics puts out or private sector estimates, we have good numbers on job creation. It is the income growth, particularly in urban India that has been lagging. And that's partly because of what's happening to information technology, hiring related hiring and this new phenomenon of gig workers. And there's also a lot of voluntary unemployment and that's partly to do with the fact that states also have been doing a lot of transfer payments lately so that that's distort the incentives. So where are the jobs going to come from? My particular view is that we do have a huge hole in the middle in terms of the middle stone. We don't have them. And that is where we need to focus on. And that is why I'm so invested in this deregulation bit. If, if we are going to make the cost of doing business for small and medium enterprises much more, much affordable, that is where I think we will be able to create the jobs. And that is, that's what history tells us. Economic history tells us. And we haven't, at some level I can say purposely it's a good news that we haven't fully, we haven't even scratched the surface right. In that sense. So that is still a lot of low hanging or mid hanging fruits that are out there in that space.

- I mean, one of the places we, where we have created jobs is really in moderate quality urban services. Right,

- Okay.

- That's, that's where a lot of the job creation, that's been the expanding part and that has tapered off a little right now. Yeah, yeah. But we need to do more. I think we're gonna hear about skilling this afternoon, especially the ora

- Success. Yeah.

- But the government announced a few skill skill programs. What's, what's the story on those and do we need more? Do we need,

- I to be honest, I think there is also a demand side issue here. And that is partly to do with the attitudes and also lack of information. And, and you're right, I think we need to, many states or even the union government have to learn from what Soto did in the, in, in the state of Esha. So skilling initiatives are underway and there a lot of cash incentives given to people, but much of scaling happens on the job. And that is where I think the apprenticeship act has been amended couple of times for the better, but still it is somewhat restrictive in nature. We can do better there. And also there is information as symmetry because, and I believe again, Nani eight step foundation has come up with a new initiative called Blue Dot, which using GPS and AI are trying to connect job seekers or skill seekers with small and medium enterprises within 20 to 30 kilometer radius. Apparently in one particular street there is a educational institution on one end and there's a small enterprise on the other end of the street. Both of them didn't know that they existed. And, and this initiative has actually enabled quite a bit of those college graduates to find a job, find jobs in this enterprise at the other side of the street. So this is kind, this kind of information as symmetry. And I believe now I spoke to labor secretary before coming and she said we are aware of it and we are piloting it in more places than one at the moment. So these kinds of micro initiatives also will have to

- Happen. So I mean, you're talking electronic labor exchanges,

- Innovative,

- And that seems like a no brainer given

- De decentralized

- Electronic,

- Decentralized, and

- Let's not let the labor ministry take it over, let it be something that is in the private sector. Sure. And you may expect more results. Yeah. In the, in the near term, you know, you can't talk about jobs without talking about female labor force participation. Now of course numbers look better now, but there is some debate about what those numbers actually mean. Mm. What's your sense of where that is and what, what's the truth? What's the reality?

- Sure. I think multiple forces or work, first of all, female labor force participation rates across the world aren't compatible. Definitions vary from country to country. And in the case of India, of course much of value addition by women happen, but they are not counted because they're not paid for. So in that sense, much of the work that happens in other countries, particularly in developments for childcare or elder care or other things happen as unpaid work in Indian context. So that is a natural for cultural reasons, understatement of female labor force participation in the Indian context. The second thing is post COVID, I think during COVID, many of the women in urban India quit their jobs because Indian states had a extended school, school closures and therefore they had to leave their jobs to look after children who were staying at home. And elders as well. And many of them haven't gone back because this phenomena of urban company and all these new gig working opportunities give them the flexibility to choose when they accept assignments and when they don't. So it isn't particular. And of course, what I mentioned earlier in the context of Zer Pradesh, I looked at the state level constraints across the Indian states. There were close to about 200 restrictions on odd areas where women were not allowed to work because they were deemed unsafe by the state. Now in a, in an era when women are now in combat zones in the Indian military, et cetera, Indian states maintaining in their statute books prohibition of occupation in 200 areas was a major dampener. And that is also is getting now addressed and up was an example. So I think it's a combination of these things that would see the female labor force participation pick up.

- Yeah. I mean one, one interesting trait, and maybe sui knows more about this and we'll hear about it, is, you know, with education actually it doesn't, labor force participation doesn't necessarily increase. Yeah. It's, it's, it's, it's sort of more flattish. So,

- And also I, I mean I wonder whether some of it is also we have to account for cultural differences.

- Yeah. That may well be part of the, the explanation, the answer and the need of the art. Yeah. So let's go to ambition and aspiration. The prime minister wants the country to be dev a developed country by 2047. We saw a number today that means a 30 trillion economy. If we say it's a 7 trillion economy, and we are talking real dollars as opposed to inflated dollars. Are we talking real or in

- No, I mean the, so we are talking about 20, $25.

- Okay. If we are talking 20, $25

- Yeah, yeah.

- The ambassadors said 7 trillion by 2030, which is about five years.

- Yeah, yeah.

- From four and a four and a quarter to seven given a reasonable rate of growth. But then from seven to 30 is a four four and a quarter times increase over 17 years. That's in the growth rates of eight and 9%.

- So Ragu, I think when, when so was speaking and when I was speaking, I was doing the math on my Excel spreadsheets. So according to the funds world economic outlook from last month, they're supposed to be 6.6 trillion by March 30, 31. Okay. So according to their projections. So we were three point

- That, that

- I'm not,

- I I I take that as granted.

- Yeah. So that's 3.9 end of Feb, end of March last year.

- Yeah. - So if you are to look at the figure of 30.2 with soup presented, if this has to be reached by March or whatever, 2047, you look at 9.7% component growth rate in dollar terms. And if I stretch it to nine, March 48, it becomes 9.3. And if I take it to March

- 50,

- Then it's a doable 8.5. Why I say doable is because last 30 years we came from 300 billion to 3.9 trillion and that was 8.6%. And that is after accounting for about roughly 3% annual rupe depreciation against a dollar.

- Yeah.

- Now if real rates and developed, well have to remain negative to take care of the huge debt. And there is financial repression and currency weakness, of course it brings with its own challenges for us in terms of export competence, et cetera. But if that is the case, then the 8.6% historical growth rate may not necessarily be that difficult to replicate. That's one way of looking at it,

- That that's one way. But, but remember we are getting richer and richer. Absolutely. So growth rate tends

- To, they can't continue the same pace. Yes, I agree with you. And I I will also give you one more explanation why that may not necessarily be transferable to the next 30 years. I mean, at some level I think geopolitical environment was far more stable in the last 30. Next 30 gonna be extremely unpredictable. And if you have, heaven's forbid, if you have another global configuration, then all your bets are off. So it's not going to be that easy. But I think at the end of the day, we have to own up the effort.

- Yeah. - The outcomes will take care of themselves. But

- Then one of the participants here was asking me the question which he said he'll bring up later also, but you need to invest hugely in human capital agree for this to happen. Where is that happening?

- So see, 20 years ago we were very concerned about enrollment issues in schools in secondary, high, secondary and tertiary. But now, 20 years later, we have cracked the enrollment puzzle. I think enrollments are no longer enough issue. It is actually growing in rural India, even faster than urban India and women more than men. So that data gives us that kind of assurance. And even in tertiary education, although we are still nowhere near developed countries compared to the beginning of the millennium when we were about 6% gross enrollment ratio in tertiary education. Now it is about 30%.

- It's more than the UK at this point.

- Yeah. So it's, it's, so that's of course, I think that's one part. In fact, I would even say we need to do a lot more on vocational and technical education. That is where I think what sub BHI did in Visha is a huge role model for the states to emulate. But the real concern I have with human capital is because somehow education and skilling are relatively more tractable problems compared to what I would say as taking care of their emotional, physical, and mental health in a world of smartphone screen time and social media. I think that is my bigger concern than education and skilling.

- But some of that is also a result of the education and skilling not being of the right quality. Right. I mean we,

- I we, - We have a, in tremendous number of colleges, but only a a a fraction of them are, are are good quality.

- No, I, I, I wouldn't attribute causality to that because that's a problem that's prevailing in every country even here, this emotional mental health. I mean, Jonathan Hyde writes, wrote about it in terms of the anxious generation in this country from 2010 onwards. So it has nothing to do with that.

- So you want them to get off WhatsApp and actually

- Absolutely. I mean many countries are beginning to ban social media apps until the age of 16. And in fact, in India, in the Indian context, and you are associated with Korea University as well, Sien labs located there, data study based on Delhi and Tamal Nadu student 100,000 sample. This the, the earlier a child is exposed to smartphones, the more difficult it is for the child to finish undergraduate education. So the later you are introduced to smartphones, the higher are your chances of graduating with a degree from college. So it is, it is very clear mental health caution. All these things are related to, so it's about going back to quote unquote the roots in terms of physical activity, connecting in your local language and, and eating not so ultra processed foods and less green time. These are more important for realizing the human capital potential in India than education and skilling. I'm confident that we will crack the education and skilling somehow because they are more tangible public policy challenges. These are more subterranean.

- So let me turn lastly to R and d, right? I mean that's huge for India's not just growth, but also its defense security, et cetera. Are we doing enough? Should we be doing more?

- So I'll start with the first of factual clarification and then I'll address the substantive part of your question. First of all, India's off stated public data that we only do 0.6 or 0.7% as r and d and that two, two thirds are coming from the public sector is to some extent understated because much of the data for that comes from listed companies. And today unlisted companies are doing much more work and it's not counted. So that is one data issue there, but I'm not therefore saying that the problem doesn't exist. It is a problem, but just, I wanted to get this outta the way, but in terms of what we are doing about it. So the government this year has activated two funds. One is to do the TRL technology readiness level zero to five basic technology fund, Anand National Research Fund A and rf. And the one is called research and development initiative fund, RDIF. And that's more for commercialization technology, TRL five to nine. So the government has seeded both these funds, but the private sector also has to play its part. And to some extent there, I feel that the established corporate sector, barring a few exceptions, we did a good job when the trips agreement happened in 1995 in Paris and then the Indian pharma companies face an existential crisis and they double, they, they doubled or tripled their r and d expenditure and they survive that trips agreement. I think we need sort of a repeat of that in multiple sectors and I don't see the signs of that yet even in these two funds. I feel the private sector isn't coming forward with enthusiasm to put in their share of resources, identifying areas, participating in the governance structure. I think that there is a mindset issue here, and I think recently I've been what we considered as a big success in India compared to, let's say China, other country where we had a much more evolved capital market than elsewhere. I think sometimes we wonder whether the focus on quarterly earnings and stock prices have kind of undermined the long-term competitiveness perspectives in the corporate sector. That's one, that's one issue to consider. There's a behavioral dimension here as well.

- Well, you brought up the issue of competition. I mean, one of the things that Chinese seem to do very well is get the companies to compete

- Domestic competition.

- Domestic competition. Yeah. And, and then everyone's struggling for market share within the country. Yeah. And then do you think we have too little competition in

- India? It depends on the sector. I, I suppose, but I think in many of the new sectors there is no dearth of competition. But I mean, you can look at aviation or passeng, civil commercial aviation or the telecom sectors. We can do with competition.

- We can do with more competition.

- Yeah.

- Yeah. Okay. On that wonderful note, we have a lot more, I have a lot more filler questions, but I thought important to open up to the audience and have people ask questions. Just say who you are and, and feel free to ask any and all questions.

- Fantastic conversation. I'm Steven Kotkin fellow here. Talk about in the growth that you're, you're dealing with the, the underpinnings of the growth, so the domestic market and overcoming some of the free trade obstacles within India, for example, energy supply and the proportion of various different possibilities inside energy supply. In other words, growth is importantly about investment in people and investment in new technology. But also there are these underpinnings where India has made some significant progress obviously. And how do you see that going forward

- In terms of going forward in which area? Talking about

- Domestic market, overcoming obstacles in the domestic market and the energy supply Yeah. Ramping up. Sure. Which is would be not detrimental energy supply, but positive sum energy

- Supply. Sure. No, I think in terms of the domestic single market, the goods and services tax introduction has played a very big role in creating a national single market. And if anything the isn't simplification or rationalization as we call it, as probably further hazen that, so

- I by, by eliminating taxes at every state

- Border, every as you cross state borders and then of course the massive augmentation of physical infrastructure has also done that. And then in digital space, we have a huge national market given the fact that most of the orders are now placed in India through electronic commerce and goods are delivered from across the across state borders. So in some sense I think we have progress quite a bit with, with respect to having these efficiencies arising out of a national single market. Now when it comes to energy provision, and again, let's say probably a decade or so earlier, we used to still think talk about a load shedding and power shutdowns, et cetera. Today the average power availability in urban India is close to 24 hours and rural India is close to about 22 hours a day. So that is definitely a huge improvement. But nonetheless there is competitiveness issue in terms of energy costs for industry versus energy costs for urban consumers, residential consumers, I think we are actually charging more for manufacturing enterprises and that is a competitiveness issue and that is where further augmenting energy supplies we are, we have done better than what we committed in the nationally determined contribution. You know, said we've, we committed that 50% of our install capacity will come from renewable energy sources by 2030 and we achieved it by 2025, beginning of this year. So we have five years ahead of time on that. But I think to some extent we also then announced in the budget that we will open up nuclear energy for the private sector and we will amend the Civil Nuclear Liability Act, which has been there, which has deterred foreign an investment. Both are hopefully going to see the light of the day by the end of the winter session of parliament by December. So we are thinking about diversifying our sources of energy supply from coal to not only non, I mean not only non renewable sources, but non fossil fuels more broadly hydro nuclear and also trying to create storage. Now most of the renewable energy generation projects have to come packaged with the storage feasibility studies as well. So pump storage or batteries. So there is some thinking that is going on in creating a national energy plan, which I think the power ministry is working on. But some of the issues that Professor Ash's presentation brought out in terms of having a national approach, coordinated approach, et cetera, and also looking at the distributional inefficiencies at the state level and in terms of preparing the grid, considering what happened in Spain on April 28th and considering what is going on in the Netherlands at the moment where there is a problem of excess supply and fa feast and famine into because of renewable energy fee situation, I think we need to have a much better sense of these additional investment requirements that that will be needed in this sector. So purely from the point of view of capacity additions, we have done very well, but these things are still lying in the future and we we need to work on them. Yeah.

- About a year or so ago on a call with the editor of Foreign policy, when Raghu was talking about Indian economic policy on that conversation, I raised the issue of growing inequality in India. At the time Ragu explained me why for the moment he was not overly consented. I won't put him on the spot again, but instead I'll turn to you and ask you if you consider this to be a concern from your particular perch.

- Oh, on that matter, I'm very happy to defer to the wisdom of my predecessor from 20 12 13. So, no, I, I agree with him. See, the thing is in terms of, if you look at it even in this country, if you look at the congressional budget office's data, where they give you household income distribution before transfers and taxes and after transfers and taxes, there's a huge difference. And the same thing works in India as well. After you take into account transfers and taxes, the situation is far better than what it looks pre transfer and taxes. And in terms of consumption inequality, it is definitely much lower given the fact that many of the, many of the supplies of food, which still constitutes a large portion of monthly consumption basket, they are now given relatively free. So if you look at in, in both these, if you look at both these parameters, therefore the issue becomes a lot less worrisome than what you would think about prima fai. I would think therefore we in the government have to continue to work on making in equal equality of opportunities rather than worrying about the outcomes, which is a combination of both global and also personal attributes, skill and willingness to work and many things coming to the picture. So from the point of view of social stability or economic growth prospects, et cetera, right now, I would suspect that inequality is not a, a situation where it has gone to a level where it is economically counterproductive.

- Thank you. So I want to talk about the financial sector, banking sector with RAG being there that did not come up in the discussion, so I have to bring it up. We invested a whole lot in India in the last 10, 15 years cleaning up the banking sector. And one of the promises was that you'll have an uptick in as a result of that private sector investment. So there was this discussion that that, that we earlier had that the gross capital formation has been low and did I get it right that you, you think that that's sort of the level that we are comfortable with in the short term? I can see that, but if we want to grow at 8.59, 9.5%, eventually that has to take up. So, so where I'm headed with that, that a, is the benefit of all that banking sector reform that we are thinking about. We are yet to see that or we feel like, yeah, we got the benefit, we reap the benefit of all the consolidation and so on. And it's just that you're not seeing that in the private gross capital formation. Maybe it's showing up at some other place.

- I'm not sure that that is the, the reason why private sector capital formation is not growing. First of all, as I said, considering the level of uncertainties that we have in the world, I am not uncomfortable with the current levels of capital formation in the economy. Now it's easy for us to say based on past patterns in other countries or even in India at 20 years ago, that we should be investing at the rate of 35 to 40% and applying some I core ratio and get eight to 9%. I think that kind of ignores the context of the global context. Now, banks, Indian corporate sector in the last four or five years post COVID has achieved tremendous profitability. And that's one of the reasons why they didn't need bank financing. Profitability was at a 15 year high in March, 2024. There is so, so if you look at the data, there is so much of retain earnings in the Indian corporate sector. Second point is the capital market has grown and the options have become so wider that if you look at RBI's, the table that they put out table 63 in their handbook of statistics on the Indian economy where they look at the overall funds resource availability to the commercial sector, excluding government, basically the growth rate of resources that have been made available to the commercial sector, both from foreign and domestic sources has grown at a rate of 28.5% in the last six years. Annual rate, even if the bank credit growth has been relatively muted. So there isn't a question of shortage of funds holding back the capital formation in the Indian corporate sector. And what I clarified to Ragu also was that the capital formation per se hasn't done badly. So I don't see funding as a constraint. We can look at whether the Indian banking system as it is structured currently is capable of driving the kind of economic aspirations that we have. And that's a legitimate discussion to have. But that's separate issue

- Back there.

- Hello, Emily Tallow. I'm a the India US postdoc at the Center for International Security and Cooperation across the street. My question is, it might be a little bit out of the economic wheelhouse, but I was struck by the comment that the, that India did not see the tariffs from the US coming that you made at the beginning of the talk. And I wanted to ask about how India is actually seeing the US in its as the u the role for the US in its economic growth going forward and whether the tariffs have re-calibrated that relationship and the trustworthiness of the United States.

- I will have to duck that question because I'll have to, you know, defer to my private, sorry, diplomatic colleagues, either the Indian Consulate general or the ambassador who spoke as to how we see this playing out. I don't think it has come in the way of collaboration in other areas, even government to government collaboration and defense has continued, even in spite of the ongoing tariff standoff and the strength of the diaspora and the collaboration in space or other areas, they are continuing. And I don't see this as sort of a more of a long, longer lasting phenomena, the current standoff. So I do believe that the relationship will endure and will expand in multiple areas, not withstanding the situation that we find ourselves in. That's my, that's my personal take.

- Thank you very much. My question is about production LinkedIn. Oh,

- Oh, we went Ninja. Ninja. Why don't you start? Yeah. Okay. And and then sui. And then Naro.

- Sounds good. You're confusing your Parsis production. LinkedIn.

- No, I, I said gro, you confuse the Parsi. Fair enough.

- This, this is a question about PLIs production linked incentives. It's still early on, but are you seeing any variation in terms of where you've made investments? Which sectors are you seeing greater returns or more promise versus which sectors are lagging?

- We will take questions as well.

- I wanted to bring up another sector that maybe we haven't discussed yet, which is AI and talking about the middle skilled workers and globally with a lot of evidence that we have on how AI could actually augment the productivity of middle skilled workers. We also know from the United States that there has been a loss of jobs, particularly for young workers and those that are lower skilled. So first entering, so India's particularly at a potential threat or an opportunity, I wanted to understand how is the government thinking about converting this into an opportunity? And particularly with the MSEs, how can we create an, create an AI augmented sort of workforce within the MSEs?

- Exactly the same question. Okay, so you have questions. Alright, two questions from three. Okay. On PLI, I think the answer is if I were to look at it as a, let's say a PE or a VC investor that I chose to invest in 14 areas and four of them have done very well and two reasonably well and the rest eight haven't taken off, I would take that kind of hit rate any day success rate any day. So that is what has happened. I think in some sectors, whether it is renewable energy or elect or white consumer white goods and and electronics and maybe a little bit in toys, I think these are the areas where it has done quite well. Textiles and some more area where it is kind of okay than other areas we haven't seen the kind of traction we would've liked. But in any case, this is not a program which in in it involves an upfront fiscal cost. It doesn't. So from the point of view of the kind of response that has come from the industry, I would think it's kind of part of the cost. But as you correctly pointed out the still early days, because you know, when we announced it in 2020 and then 21 expanded it to 14 areas and then we went through two years of COVID, followed by the initial aftermath of the Ukraine war and the higher energy price chip shortages, et cetera, in 2022. So there has been a little bit of time taken. And then we have to account for the fact that global state of uncertainty has also picked up. So all of this will naturally cast a shadow on how much, how much, and how quickly the private sector responds. So I would not write it off as yet in terms of its success rate in attracting more domestic manufacturing. Look on the AI question just couple of days ago came across an NBR paper, which looked at 200 years of industrial revolution and transition, and the paper concluded that AI will actually make lower skill, lower wage, male dominated skills, more in demand than before. This is an NBR paper. I, it just came out maybe a month ago and I saw it a couple of days ago. So I think right now it's still very early days to see in, ideally, yes, you know, we would love to see AI being a labor augmenting intervention rather than labor displacing. But how it plays out, we first probably have to get the current capital market bubble in AI out of the way. Then we can have a more informed discussion. Because right now what is happening is in order to justify investors' faith in these companies, the companies are also given to making outlandish predictions about the kind of inroads AI will have. And maybe once the bubble bursts, everybody will talk about the, talk about it more realistically. So, and then I read another paper which talks about world model versus local model. So for example, let's say you are used to cooking in your kitchen, you know where the fences are, how the stove works, and where the spices are kept, et cetera. And then you go on a vacation, you go into an Airbnb apartment and that's completely laid out differently, but you are able to adapt very immediately and that they call it the world model behavior. And then ai, which is trained on particular set of data. So they put humans and AI apps through this world model, local model situations. In every world model situation, the humans actually ended up doing far better than AI apps. So they still, so this particular paper, which is again, multiple authors, but predominantly MIT led, the conclusion was that adaptability is still a missing in AI apps, which sort of paradoxically is a reassuring thing for humans. So we need to look at, from the Indian standpoint, we need to do two things in parallel. One is to our youth to be able to participate in the AI world, but also make some of the skills, which is why I think Mr. Barak's presentation will be very important to us. Make some of the skills that went out of fashion more fashionable again. And that will be needed also for the, from a, from a growth perspective. So that is where we are. So we wrote a chapter in the economic survey in January, or special chapter on ai, and we will be following it up in the coming survey as well.

- Great. Fantastic. We are out of time. Please join me in thanking Dr.

- Today we are honored to have a lineup of some of our Hoover talent speaking today about the geopolitics that's taking place between the US and India. India is in a really interesting situation, primarily for its geography. It's next to one of America's biggest rivals. It's got its own issues going around with neighboring countries, and of course it looks straight into Central Asia and the Middle East. So India, as you can imagine, is quite a promising, hopeful place for America, which is looking for a more stable environment. The panel that we've got up here today are esteemed people who've tried to make a more stable world, beginning with Admiral Jim Ellis, who's a Hoover distinguished visiting fellow, the Annenberg Distinguished visiting fellow. Jim is one of the nicest, best people around. He's used to commanding huge, huge, huge, literally, you know, NAS, right? And he's just a sweet fellow, can't say enough good things about him. I'm trying to make this a little more personal since it's, it's a dinnertime discussion. Chu Meet is my colleague, he occupies the floor with me up on the second floor of HHMB. He comes to us from the University of Indiana, Indiana, university of Bloomington. He is an expert on all things, as we find out with people around here, but especially cashmere and foreign policy. And then Ahmed, who's gonna be our moderator today, more titles than the King of England with this fellow, and deservedly so much more than the King of England. He just was born into it. Ahmad had to earn these titles. Amit is an excellent, excellent person who tends to focus on finance and business for all of you, that sounds excellent for him. He was a little bit nervous about having a geopolitical panel, but I think as you'll see in a moment, he's more than up to the task of moderating with these two fine gentlemen. So with that, let me give it to thank you.

- Thank you, dha. Alright, so you've heard of Indian Spice and there is no spice in the food, but I'm hoping to inject some spice in our conversation. So welcome. And we are hoping, like Dcha said, to focus on India's geo strategic position, which as you know, with the global order shifting as we are seeing around us, perhaps more than and faster than any time since Cold War, to have this conversation. And the way I am hoping you all will think about this, if you were during the day in the conference, you already heard these bits and pieces, but just to situate it, you can think about three forces hitting India and US relationship. First is the whole structural transformation of Asia. The idea that China is being very assertive. There is also a fragmented regional architecture and a growing competition for influence, not just in the Indian Ocean, but Southeast Asia and Middle East. So that's one piece that you should keep at the back of your mind. The second is what you heard today, for the most part, that India has had a amazing journey in the last three decades. It's moved from a closed socialist economy to a 4 trillion tech driven, globally engaged power. Its strategic identity, I think is long rooted in autonomy and non alliance, but it's adapted, let's say, let's put it that way. So India cooperates with the US on tech counter-terrorism, defense modernization, but it still maintains ties with Russia and Middle East and so on. And third, if you think about the India US relationship, which is the theme of this conference, in some sense, there is a persistent disconnect, I would say, at least from my perspectives, for two countries, which are democratic in their foundations with dynamic economies and shared interest in stable Indo-Pacific relationship, there is still a lot of weight of history which drives this relationship. So there is alignments around Cold War, which still run true, and maybe that leads to mismatched expectations on both sides. And as China reshapes the map, the stakes of misunderstanding are probably never higher. So today we are basically gonna be doing this and asking where is India strategically situated? How does it navigate China, Pakistan, Russia, and the us? And what would a stable long-term partnership of India us look like? One that's not based on nostalgia and wishful thinking, but on the reality and world as it is. And like din said, to help us, we have two experts which have very different perspectives on this. So they'll compliment each other and I'll,

- Or contradict,

- Or contradict, I'm hoping contradict more than agree. And the way we thought we would run this is we will go to both the panelists first, and they'll have some opening remarks on these themes. And then I will engage them, throw some spice in the conversation, and then we will go to you. So keep thinking about questions you might have. We don't have a lot of time, but we'll hope to keep it brisk so that we at least get the pointed conversation on the table. So admiral, take it away.

- Thanks very much, Amanda, and thank you all for, for allowing me to be a part of all of this. I, at first was wondering why Denise asked me to join it. And then I realized it was actually a tutorial for me because I learned so much today about the, the important elements that, that you all are doing to, to deal at more of the tactical level, if you will, from a military perspective. And I, I found it absolutely fascinating. So thank you for, for that opportunity. We're probably gonna elevate it a bit, I think as an old fighter pilot, maybe up to 20,000 feet or something like that. But my message is, is fairly simple and I think, let me keyed it up quite nicely. Some years ago across the bay in Alameda, there used to be a, a navy station, a naval base. And I was once captain of a nuclear aircraft carrier that was stationed there. And hiss name was Abraham Lincoln. And then as a result of being its captain, I decided to do some research on Abraham Lincoln and became quite an admirer of them. And one of the quotes that I often use is one that he gave to the Congress after his, his second inauguration, where he said, the dogmas of the quiet past are inadequate for the stormy present. And I think that's the thematic theme that I'd like to touch on tonight, because I really do believe that that's true. It does, it doesn't mean that we're wrong or that the historical way in which we approach this was incorrect. But you know, like John Lennon once said, life is what happens to you while you're making other plans. And the, the world has moved on in, in real tectonic shifts that, that I think both the United States and India perhaps need to, to rethink and and account for. So I'll talk hopefully very briefly about what I see as some of the strategic choices facing India given China's ascendancy. I'll talk about the, the elephant in the room, as I call it. That's not a Republican analogy for those of you that are, but it's certainly the recent downward trend in US India relations and how severe that rupture is. And then I'll talk if there's time about some defense diplomatic and economic architectures that might contribute to our collective security in the Indo-Pacific region. India's strategic choices under China's rise, you know, obviously have capabilities, alignments and constraints. We define national security here at Hoover, excuse me, very broadly. It includes energy, it includes economics. What you've been talking about today in his essence is really national security in a sense because without a robust and prosperous economy, there is no national security. And Denise has heard me say it in the energy context as well. In this day and age, I think most of us would agree that energy security really is national security in a sense, as the folks in Europe have found and some of our friends and potential adversaries in in the Indo-Pacific region fully appreciate. So we think India confronts a complex combination of a contested land frontier with an enduring potential for kinetic escalation, Chinese power protection and projection into the maritime approaches critical to India's trade and energy security. And then beijing's growing diplomatic and economic influence across South Asia and the Indian Ocean, literal, what I call the potential for finlandization of the, of the region modeled on what the Russians were able to do in Finland for, for many, many years before and during World War ii. And so those are the, the dynamics that raise the importance of Indians, maritime, mari modernization, its force posture along the Himalayas. And its external partnerships. And I'll get to that too 'cause it's the external partnerships I wanna focus on. India's got some choices and strategic options and trade-offs. I'm a small town guy from South Carolina, and my grandfather used to tell me, Jimmy, it's easy to be a clown if you don't have to run the circus. So my purpose here tonight is not to criticize those that are making policy or shaping it or have shaped it in the past, but to point out some observations that may have relevance and feel free in the q and a to disagree. But I see India's options as, you know, they can continue to, to seek a balance by strengthening deterrent capabilities and deepening appropriate partnerships. I think that's a, a viable option, probably the most likely they can hedge. And there's some question if that hedging is already underway by selectively engaging Beijing economically while limiting security cooperation. And then there's a final option, which would be, I would call strategic accommodation, which would involve concessions in either influence or territory that's not politically attractive and it's too operationally risky. And I don't see India pursuing that. The downward trend. It's, you know, Sumi, I were talking yesterday, it's in the eyes of some, not all this is as bad as it's been for four decades since after the, the nuclear tests and the like. I'm not in a position to judge that. I talk to some people who are in India, I get different stories. Some say, no, it's ephemeral, little past things are gonna go back to normal. Others say, nope, it's, it's irrevocably lost. I'm, I always say there's three sides to every story. There's yours, there's mine, and there's the truth. And so we need to figure out where the truth is in, in all of that, that conversation. And I think that's an important place. There is no doubt that the, you know, the, the punitive tariffs and the advanced legislative me measures that are under consideration to, to adversely affect the technology service industries and the like, have huge implications for India economically. And, and part of it's complicated by the fact that, you know, I was interested in the ambassador and is addressed to us to start the conference, talked about the ecosystem. I didn't use to like that term. I'm growing to appreciate the term ecosystem. But I think what we're living in today, unfortunately, is an ecosystem in which a lot of the, the leaders are so personally wrapped up in these issues that there's a real risk of that being the primary influence or reactive mechanism that of shapes national policy decisions and the like. And it's a, it's a human trait. I'm not being critical of, of any specific individual. I wasn't it Maslow that said esteem, I think was number four in his, in his hierarchy of needs. So we all need that esteem. But I'm wondering if it's, if it hasn't risen to a level of prominence between Putin and, and Modi and, and and Trump, that now makes us kind of in an interesting situation where it is a, a part of the consideration. Is it the overarching one? I hope not. I hope cooler heads will prevail and we can talk about that. How serious is the fracture? Well, it's tactical in a, in military sense. I mean the tariffs, the bills, there's a little bit of structural dislocation in that we've, we're losing some trust and confidence in, in America and its reliability as a partner. But there are other things. I don't think that the strategic alignment has shifted, not yet. I mean, I think it's too fresh, it's too new. People do understand the importance of the relationship. So, you know, in a, in a sense the challenge facing India is that old aphorism we all remember where you can't control all the time what happens to you, but you can control how you react to it. And I think that's the essential question that needs to be considered right now as we look to the options that are confronting India, it's okay to focus on the tactical to do stuff, but as somebody has heard me say too many times, there's an old military saying that tactical energy in a strategic vacuum is a recipe for disaster. Yeah. In other words, if you don't have an idea of what you wanna accomplish doing stuff, the tactical level stuff can be counterintuitive or counterproductive or actually damaging to your progress going forward. So what of the things that, that are complicating this, we've got some divergent strategic cultures. Andy has historically prioritized its strategic autonomy, it's non-alignment, it's sovereign right to independent policymaking, all of which is completely understandable. But the newer US expectations of alignment and geopolitical crises is a complicating factor that we perhaps didn't have fast. I mean now Washington can review or view new delhi's restraint as equivocation, if not in their words moral cowardice. And you know, Jim Madison and I wrote a piece some years ago where we said, you know, we used to, we're accustomed to thinking of things. If they're not with us, they're against us. But the United States needs to understand is if they're not against us, they're really with us in a, in a very real sense. And that's an important flipping of the context for the conversation going forward. So, you know, the question that India has to answer is, and only India can answer this, is its historic playbook, the one that it used for years. And, and that ambivalence, that neutrality that, you know, that free electron approaches, I call it, for those physicists like Steve, the room that can flit from one atom to the other depending on the circumstances. Is that game plan still adequate if we're playing a new game and, and has it moved on or will it go back to being the game it always was. I'm a believer that the game has changed and, and that a reassessment of that and the fine tuning of that might be in, in India's interest because it's not just the degree of difficulty now it's the speed with which things are changing. And, and that's the, the complicating factor. I mean, change is not hard if it's slow. I mean, I used to have hair for example, but, but now it's the speed of change, the pace at which is going that that complicates things every day there's something new. It's the information flow, it's the, it's the changing the whipsawing of policies and decisions on the part of the United States that that can inject a lot of uncertainty there. And so how do we think about reversing this? I think it's gonna be, that's gonna be hugely important. People talk about, you know, how you might do this. First off, I think this is not gonna go away anytime soon. People, we were talking before during the cocktail hour about, you know, we're only 10 months into this administration for crying out loud. We've got three more years left. And look at what's happened in those 10 and those statements. So the idea that this is gonna pass and get back to normal, I don't think so from a physics standpoint or a metallurgical standpoint, it's kind of like that bending metal, it never quite goes back to what it once was. So the question is how dramatic is that change? I think we need to focus on this and I would recommend that India think about it in these terms as a, as a permanent, you know, minister level, bilateral mechanism for crisis prevention and dispute resolution and others. You can't have an ad hoc group that you get together every time you get a bad tweet or X or whatever it's called these days. I mean this is gonna be a part of the conversation. I dunno how India is organized. It's not my remit to give you that, but I think that needs to be a part of the consideration. We've gotta negotiate an economic deescalation and a rule rules-based trade map going forward. And, and I talk about negotiate because you know, sometimes people talk about bargaining, bargaining is unilateral, bargaining is what's unfortunately happening now when America says this is what we want and we're now only arguing about the price. A negotiation is a win-win. The objective is to have both sides benefit from this. And, and that understanding, I think at least temporarily seems to be a bit absent and that's America's fault, not India's fault. But I think we need to differentiate between bargaining, which is what we're really doing and negotiations, which we want to get back to. I think there's an opportunity in defense industrial cooperation with the appropriate levels of reciprocity. We've nibbled at this for a while. I was on the board of Lockheed for years. We manufacture C one 30 fuselages there, you know, Sikorsky helicopters there. But you know, the jet engine piece has just come to India in the last couple of years. You know, how do we get beyond that, satisfy the IAR needs and create a sense of collaboration and ultimately perhaps dependency in some positive ways that to conserve us going forward. We've gotta respectfully manage India's desire for autonomy and we've gotta acknowledge India's right to that. Avoid coercive ultimatums on transactions, be it energy or legacy defense ties all the things we know so well. And, and I think Washington then can calibrate its expectations. 'cause we need a little bit more transparency from India on what, what it means by this. When, you know, the prime minister goes to, you know, to China for example, the good news is it didn't stay for the parade. That was an intentional signal. So I mean, but a little bit more transparency on that can avoid the misperceptions that can can arise if all you do is see something on the news and you get some snide comment in, in response from the White House. We think there are multilateral opportunities for India and, and using multilateral platforms. We, I believe personally this is a leadership opportunity for India because, you know, China talks about it doesn't wanna be a global hegemon, but I guarantee you it wants to be a regional hegemon. And so if it isn't going to be China, who is it going to be? And I think that's an opportunity for India, should it choose to, to think about it in those terms and, and fill that vacuum that will be created if and when the US decides to, to, to pull back from that. And finally, we've gotta continue the people to people, the educational and subnational ties like this conference that are so important. If we're not talking up here, we need to be talking down here so we can preserve the relationships and the understandings and the appreciation of, of what we're looking for. So in conclusion, I think the downward trend in US India relations is neither trivial nor irreversible economically punitive measures and protectionist legislative proposals of introduced a pronounced shock to pronounce, shock to the trust and, and have tangible near term costs for India, there is no doubt. But the deeper strategic logic shared interest in maritime security, counter-terrorism, economic complementarities between the two countries offers a pathway back. If we can get to the, to the point, as I said, of negotiation rather than, rather than bargaining. And I think India can and should lead in the face of this strategic ambiguity that they're getting. And and believe me when I say it only means that India consider changing its policy, not its principles. Thank you. Thank you,

- Thank you, Amit. The utterly fascinating thing is that I cannot find a single item to disagree with. We are environment agreement. There is literally no daylight between us and I, you've literally made my evening by invoking the term finlandization because I used it in an article and I was excoriated for suggesting that the PRC has actually Finland ized India, that certain options are simply off the table, which is exactly what the Soviets tried to do to Finland during the much of the Cold War. It's interesting that Jim focused mostly on the present because I had actually was going to talk about the past, and so this will be quite complimentary. There are six points I will make in this presentation. First, during the Cold War, the relationship was non-existent. The US and India really had very little in common India's strategy of import substituting industrialization, its archic economic policies, the lack of people to people contacts. Prior to 1965 when the omnibus civil rights, not civil rights, but the Immigration Reform Act was passed, and also there was no strategic relationship worth the name. All that started to change in the last years of the Clinton administration. And then a bipartisan consensus developed about the importance of India. And of course it received the most extraordinary boost in the wake of the US India nuclear record under the George W. Bush administration. Something that I continue to tell my Indian interlocutors is that you have no idea of the amount of political capital that the president ex expended, both at home and abroad to give, to make an exception for India. That was a remarkable achievement and it needs to be repeatedly underscored. My third point is that a range of administrations, regardless of their ideological orientation, have sustained this relationship, including during the first Trump administration. It's only in the second incarnation that there has been this fracture in Indo US relations, but I still remain hopeful that it will not lead to a permanent rift. The fourth point is, sadly, I would argue that going to enforce errors on both sides, the relationship is definitely in the doldrums. However, it would be a mistake to argue that it is going to inevitably plummet. And I'll tell you why, for both historical and contemporary reasons, it's a little known fact that during the 1971 East Pakistan crisis, the US of course sent in the USS enterprise into the Bay of Bengal and under the EG of the US seventh fleet that's well known. What's not known, and I obtained this through a freedom of Information Act request, is that the orders to the seventh fleet were the following. If any Indian naval vessel tries to intercept you sink them. Hardly anybody knows this. But this is a fact, and this was the extent to which the relationship had plunged. And the memories of 71 continue to animate a generation still that's alive in India and who lived through that episode. So we are not in a 1971 moment that's in a histo to, in a, to put it in historical perspective. Second, the relationship has considerable ballast today. Look at the number of Indian CEOs in this country, and particularly in the high tech sector. It's going to be extremely difficult to unravel this relationship, the troubles with the H one B visa issue, not withstanding. Second, look at the range of people to people contexts. Look at the, the scope and the dimensions of American investment in India. Admiral Elli has already alluded to certain components of the defense industry, which are now located in India. This was unthinkable 30 years ago. It was unimaginable. That's completely changed. In addition to that, there is a viable economic relationship. The tariff war, not withstanding, all of this cannot be unraveled in a matter of months and one should not act on the basis of a peak fifth, I would argue no, that, sorry, that was my fifth point. That the relationship has substantial the last economic strategic and diplomatic sixth. Then finally, it's easy to become despondent and to be trapped. And to use a phrase that a noted American political scientist, David Apter coined to become a prisoner of the moment, we should not become prisoners of the moment. Yes, this is a trying time, it's a vexing time. There are sentiments that are frayed on both sides, but the relationship has substance unlike in the Cold War. Consequently, just as Mark Twain once wrote that the reports of his death had been greatly exaggerated, I think it, it, it would be much too cavalier to suggest that this relationship now is completely on the skids and that it's irretrievable, it most assuredly is not. And just to follow up on a couple of themes that Jim highlighted, there is a, a, a a couple of issues that I think really trouble India's policymakers despite the significant improvement that has taken place in the relationship over the past 30 years. And this is even before the Trump tariffs and the rift or the fracture that has taken place. And here I'm going to put on my international relations hat. These are what international relations scholars call either the fear of abandonment, that the US ca will not stand by India at its time of need, and that India will be left to its own devices or entrapment that India will become so close to the United States that it will limit its strategic autonomy. Both these fears, I argue, are completely unfounded. Again, since I'm a historically oriented political scientist, while people remember the tragedy of 1971, what most Indian policymakers forget is that, that the US provided vital supplies to India in October, 1962 when the PLA was swooping down the Himalayas and had seized significant portions of Indian territory. I had the privilege of interviewing Ambassador Elsworth Bunker, who was the ambassador to India, just be before the onset of the war. And there was an acerbic Indian defense minister called Krishna Menon, who always was prodding and peaking the United States Bunker told me that at one night he's woken up by a, a phone call from Krishna Menon at about 2:00 AM in the morning and Menon says, Ellsworth, I need C seventeens. Said, why are you calling me up at two o'clock in the morning? Well, it occurred to me we desperately need C seventeens to be able to quickly transport our troops up to the border. And I don't possess it. Said, well, couldn't this wait till the morning? No, it occurred to me at this hour of night, so I thought I'd call you. And Bunker said, well, I arranged for him to get the C seventeens. Not only that, it's little known that the US collaborated with India to ha to have over flights of the Himalayas of American reconnaissance aircraft with Indian Air Force markings all the way until 1970 when Hendrik kissing because of the opening to China ended that relationship. So it's not as if the US has, despite Cold War tensions abandoned India. Far from it, there was a strategic, there were elements of strategic convergence which have come roaring back today, especially because of what Jim highlighted, the increasing assertiveness of the PRC. And to use an old English expression, the periodic sweet words from Xi Jinping butter, no parsnips. This is an enduring rivalry. And anyone in New Delhi who believes that this rivalry will simply be, can be ameliorated by one more summit with Xi Jinping is obviously smoking a weed I was familiar with in college and unlike a certain American president, I did inhale. So this notion that somehow a miraculous sarama can be achieved with the PRC is simply a fool's errand. And the India, essentially, again, to wear my international relations hat has two choices. One is called self-help, where you build up your own capabilities to deal with an implacable adversary. I think that's admirable, except it's not about to happen anytime soon. The asymmetries of capabilities between the PRCA in India are so great that in the foreseeable future, the strategy of self-help is not a viable one. So what can you do? You resort to what is called external balancing. And yes, the quad is fine, the Japanese relationship with Japan is fine. A relationship is Australia is desirable, but despite the current difficulties, the only country that can ensure that India's chestnuts can be taken out of the fire remains the United States. If you believe otherwise, you are living in a world of your own making as Prime Minister. And Heru said in the wake of the 62 war, he said, we have become, we were, we are victims of our own illusions. We were living in a world of our own making.

- Alright. All right. Okay, let me, let me ask a couple of questions and then please keep your questions ready so that you can get to food. So our incentives are aligned. I guess, Admiral, you mentioned a few things, so I just want to put you in the spot to give an answer. Good. And I don't think you'll shy away from it. You talked about how us and India are talking about co-producing jet engines, drones and so on. Is this partnership real or just political signaling?

- Well, I think it's, I think it's a little bit of both. You know, the reality is that India has a great technological capability and that's, that's well known and, and well documented. And so the, the issue always comes back to intellectual property and ITAR and restrictions and, you know, when things start to get classified, you know, today's, in today's world, basically every, every fighter jet basically is a, is a, is is software with wings. And, and so the idea of how that works and, and particularly as artificial intelligence becomes a part of it, being able to safeguard those things, that's a, that's an issue with, with treaty allies that we have. And we've done conferences here at Hoover and documenting how difficult that has been as we move and Aus, for example, into pillar two, which is technology focused and, and has had its fits and starts as a result of difficulty. So I'm not trying to make it easy. In fact, Ronald Reagan famously once said, there, there are simple answers, they're just no easy answers. The two are not the same. And so it's easy for me to say we need to do more of this because to capitalize on that, but it is gonna require some give on both sides. We're gonna have to have more trust that this will be safeguarded, that it won't be proliferated or shared inappropriately. India will likely be expected to make some long-term commitments. I mean, years ago, and it was offered the opportunity to, Lockey was willing to move the F 16 production line to India, but India chose not to, to accept that. And, and so again, it's, it's got to be a negotiation, not a bargaining. And, and I think it's worth the exploration. And I think if we're gonna have a long-term relationship of real value, that's what it's gonna have to come down to back, back to what, you know, Sumi said, you know, and, and again, this is a question that only India can answer, but if India's future, as you see it as, as all Indians see it in the, in the, in the distant future involves a relationship with America, a, a positive and and strong relationship with America, then why are we pretending that we're gonna walk away from this and that we're gonna go, we have other alternatives and the like, and I think our focus should be on how do we realize that it's what I call the foggy path syndrome. Okay? You may not be able to see clearly to the destination, but you can see a hundred meters down the path. So you start walking and then you can see another a hundred meters, and then this takes you in a direction that ultimately gets you to your goal. So I'm not implying it's easy and it can be done with a, a signed agreement or a hand wave, but I do think it's that important that we establish that kind of a quality relationship that has legs in the in.

- Can I, can I follow up? Sure. And Sumit, please feel free to jump in because you'll see this is connected to many of the things that you've talked about. How do you assess India's military modernization, especially when we think about the joint China Park dynamic that is happening in the region. And Sumit, you should also comment on this because this dynamic is relatively new. Probably you, you, you've been talking about it, but

- It's not fast enough in, in my view. Again, it gets back to that topic of speed I talked about. I mean, these things are changing dramatically. It's, it's not a secret and it's certainly not classified that, that Pakistan brought long range air-to-air missiles to the, to the fight. And, you know, and, and you know, it reminds me the Civil War story, it attributed to a a, a confederate general that was raised not far from where I grew up, who told his constituents before the Civil War that we can beat those Yankees with corn stalks. Well, they lost the war. He immigrated to, to England to hide after the war. He finally came back sheepishly and one of his neighbors asked him, I thought you told us we could beat them with cornstalk. He said, we could have, but they wouldn't fight with cornstalks. You know, and, and so my my point here is that, you know, you've gotta deal with the technology piece and, and the world is changing and if, if there's going to be relevance and there's gonna be a part of, you know, and I'm not implying that the quad needs to be turned into a military alliance. I'm not saying we need to mirror image NATO and the Indo-Pacific. I'm not saying any of that thing, but there's gotta be a security element to this that involves interoperability and we're challenged in that regard. We, the US are, I mean, we can't provide to Taiwan today what we provide to the Ukraine every day because we don't have the ability to plug into those communication systems, to deconflict targets. If we're gonna come to somebody's assistance or fight together. We wanna make sure we know who the good guys and the bad guys are, the identification friend or FO capabilities, the Blue Force tracking the kinds of things. And, and if you develop that capability, it becomes a deterrent character all its own and, and your potential adversaries see that. And so it doesn't compromise, it doesn't necessarily compromise your independence, your independent policy judgments and those kind of things. It's just there in reserve if and when you need it because there's not going to be time to create it on the fly, given today's technologies. Thank you, Sumit.

- Unfortunately, Indian military modernization is at best a patchwork quilt. There are some elements that are underway, which are working, but the, basically the defense industrial base needs to be fundamentally revamped. The defense research and development organization has, for the most part failed to, to develop technologies which are commensurate with the challenges that India faces. The discrepancy between the PRC and India is growing by the hour, not by the day. And it's interesting that Jim brought up the F 16 production line because if I may be so self-referential, the current assistant Secretary of State for South and Central Asia, Paul Kapoor and I wrote an article in foreign affairs called f sixteens made in India, where we made a spirited argument why India should accept this. Unfortunately, the policymakers said no, the Pakistanis have f sixteens and so we shouldn't purchase the F 16 production line. It was one of the most colossal strategic errors. India is, has been trying to develop a light combat aircraft. It's often referred to somewhat sardonically as the late coming aircraft. It was started in 1984, the project even today, India just last week announced, and actually I'm delighted at one level it's going to buy 113 G 4 0 4 engines to the power the aircraft, the kaveri engine that was developed by India could not generate enough thrust for the plane to take off. The avionics of the plane are from France, the radar is from Israel. That's delightful. I suspect what's indigenous about the plane is the paint. If this is what the Hindu Sun Aeronautics Limited is producing today, we need a fundamental revamp of the defense establishment. And it's not going to happen overnight. But given that it's not going to happen overnight, you turn to a partner who can actually be of assistance while you try to get your house in order. And the tragedy is, Hal was not always like this. There was a time when Hindu Sun Aeronautics limited manufactured on the license from Britain, a supersonic aircraft called HF 24, and also manufactured a subsonic aircraft called the Nat. Both of them saw service in 1965 war and the 71 war. But since then, despite the expenditure of crows of Rues, Hal is a basically a white elephant and

- Say something to, to build on SUNY's point. And I, we don't have time to dwell on it tonight. And it's not the subject of the conference, but the character of tech, of of warfare has changed. Absolutely. I mean, and, and, and so it's, this is not a, a criticism just of India, it's a criticism of the United States too. We looked at our own reform proposals for the defense industrial base, we call it. We're not nearly fast enough. We're not nearly cheap enough. We're not nearly in numerically at, at the levels that we're gonna have to have. I mean, we're proudly talking about it. I mean, the most sophisticated surface there missile one of them in the, in the US inventory we produce at the rate of one per month. One per month. You know, there's gonna be thousands of those fired on the first day of a conflict. And we talk about drones and, and, and the like and, and then the potential. And we see that playing out in Ukraine. We don't, I mean people say we can, I can build you a drone for a hundred thousand dollars. Ukraine is expending 8,000 of these things a day. You know, we're not nearly cheap enough, we're not nearly at the right price point. And, and how we think about that and then bring it together with legacy systems, how do you command and control it all? I mean, we're all facing these kinds of challenges. Wouldn't it be nice to begin to think about this collectively rather than individually and share those experiences all along and build that cohesiveness together as we create this architecture. And I just think that there's huge opportunities given India's technical capabilities. Its workforce availability and the like, if we can find the right collaborative mechanism.

- So on that great note, let's open it up for questions. Please raise your hand. Yep, please go ahead. I think they might bring the mic, bring mic. So that

- Ravi Topper, I've been in the foreign service for 36 years and I'm currently the senior director for the US India Strategic Partnership Forum Compliments, it's a brilliant analysis, historical, contemporary and defense and security. Just want to snatch a few moments because this is not my panel, but based on my sustained exposure to geopolitical international affairs. I just wanna say in a summary way, summarized way, all that India's asking for is a bit of diplomatic, political and economic space. India is a very ambitious, aspirational, capable, emerging economy. It has certain domestic compulsions. We also appreciate that your government at this point has some domestic political compulsions. I think that is all that is, you know, comp complicating the issues. When I examine Prime Minister Modi's or review Prime Minister Modi's visit, I think in June 23, and the amount of defense and strategic increment and resonance which was there in the country and the exemptions, the exceptions which were made giving technology, et cetera, to India. I see that as a conscious assessment. It is not a whimsical political shout. It was a conscious assessment by the US intellectuals think tanks defense establishment. And it was an acceptance of that by the Indian government. I also don't see, I find it naive to suggest that India will walk the China away. As long as China is going to be inward looking and not a democracy, I don't think we will risk that on in the same, by the same token, I also don't see the US allowing that to happen because the only country in Asia at this point, which can possibly contain and check the Chinese influences, India is one fifth of the world's humanity. It's an ambitious power. It is participating in a lot of multilateral conversations. It is committed to a structured, multilateral engaging world order. Is that not in favor? Is, does that not support the US corporate sector? Does not, does that not support a better planet? I think we, some of the global south leaders, US Europe, have to be the pillars and the foundations of the new world order. Otherwise you're going to have AI and god forbid, quantum computing, which is going to go far beyond the 1 20, 1 20 or 1 1 50 bits encryption. If this gets into rogue entities and road and closed inward systems, I think it's very dangerous. So I don't wanna continue on this because I can, I've been in this profession for a while, but I just want to assure that there is a lot of well thought analyzed, you know, basis and foundation, this relationship, there's a lot of economics, there's a lot of market, there's a lot of contributing together the talent and the engineer. So many things which can be done together. So I, I would just like to, you know, put my vote for this relationship and I don't believe that this political squall or storm is going to really dilute the long term potential which exists. Thank you so much.

- Thanks. I'll, I'll collect a few questions and then I'll give you the last word to close the panel because I'm guessing we'll be kicked out with without food, which would be, which would food for thought but not not appreciated by our guests please. So I'll collect two or three

- This a question for both the panelists, but I start from pro galez remark, you said US planes flew with the IF in between 1962 and 70, and then it stopped because of the next Kissinger approachment with China.

- Yeah. - And so why can't that be happening now again, you said summit theory will not necessarily mean a shift in relationship, but president tweeted about G two. So is that one of the possibilities that we, are we trying to sort of gloss over or overlook because we don't like that prospect? So are we confusing our preferences for predictions? So I would like to hear the views of both the panelists. Thank you very much.

- Thanks. Let's go to this table.

- Yeah, I, I'll keep sitting if, if I may. So it's hard to be cynical after a wonderful seminar organized by Sumit. Congratulations. So my question's fairly, fairly simple. I mean, to be cynical, you know, almost every country acts in a self-interest. Absolutely hard to believe that is not true. And when United States, you know, blew hot in India, it wasn't their self-interest because they had other conflicting interests. And, and for the last 20, 30 years, I think as Sumit pointed out, it's been positive to India, but again in the self-interest of United States. So my question to you is, because I need to opine on this in Delhi soon, is how come United States has changed his attitude to India? So it's also in the self-interest of us. So what is the source of the self-interest which causes the switch?

- Thank you. Thanks for, thanks for really stimulating pair of conversa of, of, of, of remarks. I both speaker made a really convincing case in, in an interestingly, I think perhaps even more passionately, professor Gangoli for the preservation and sort of backing the India US relationship. And I'm largely convinced, but it seems to me that it's worth at least sort of interrogating the alternatives. And the alternative is of course, what was India's growing potential relationship with the PRC and I. I think that the kind of idea that there'll be a sort of a, a, a strong alignment, both of you all dismissed and I think it's fair to dismiss it. But what about something that ends up being sort of a non-alignment 3.0 kind of story for India, right? Where there's a bit of hedging that goes on and you can see the logic in that from the Chinese point of view. Well, well, let me back up a second. Most of the arguments for the India and US story here. And so, so as I said, I'm, I'm playing devil's advocate here a little bit. But most of the arguments for the India US story are about the structural interests. But what we've seen in the last few months is that the structural interests aren't actually dominating the conversation. And the US political system is throwing up a set of idiosyncratic reactions. And in that context, what should India do? Hedging seems to be perhaps something to be thought about, right? So what does China need most? It needs a market to rival the us The only country capable of providing that market is India. What does India need? India needs access to technology, it needs the ability to sort of learn how to rapid manufacturing perhaps the kind of joint venture story I we heard from DR. And that there's skepticism in China about opening the door to India, which means it probably won't be of the scale that India desires, but it doesn't mean it has to be completely closed. Could run imagine a sort of muddling through story from both countries. I don't have any delusions despite my professional center of gravity that climate change is gonna drive this decision. But could it be a thumb on the scale? Because at the end of the day, for India's energy needs, if we are going to go to a fossil world, to a fossil world, if Africa's gonna go to a fossil world, you don't have to be a climate existentialist to know that the problem is gonna get much, much worse. Right? What's the only country capable of providing that green energy technology right now? It's really China. The US is, we have conversations increasingly about China's the emerging elector state and the US is the emerging petro state. If I was an Indian policymaker, I'd be very wary of doubling down on a petro state for the developing world, right? So are there ingredients there that allow China and India to hedge a little bit? Can we end up in that kind of non-alignment 3.0 sort of world I had? I think it's worth engaging and perhaps dismissing those remarks before we completely embrace the inevitability of the India US rep. Rema.

- Thank you both so much. Incredibly compelling. I'm running Desai, one of the visiting fellows here at Hoover. So I guess two quick things. One is there seems to be a conspicuous paucity of good historical metaphor for what's happening in the relationship now, right? And folks are invoking, you know, admiral, you talked about post nuclear testing in May of 98 and the imposition of sanctions. I've heard folks talk about DIA regati or going all the way back to the Cold War. This moment although seems different. And part of that is because, you know, we've heard one of the governing platitudes of the relationship is that it's very vulnerable to a rational exuberance and irrational despair. Are we in a despair poll right now? At the same time we've also heard chuma, you rightfully pointed out bipartisan for the last 25 years or non-partisan, right? It's a relationship that transcends personality party irrespective of who's the prime minister of President China was the, you know, one of the foundational pillars of countering a rise of China that's again, spanned all these administrations. A lot of that seems to be in question, right? There are those that are now asking, does President Trump perhaps see China? Yes as an economic competitor but not as a geostrategic rival based upon the way things were unfolding. Now, does that fundamentally a put into question the underlying strategic logic going forward, which is why what we're seeing in the past isn't gonna work? And two, in terms of concrete proposals moving forward, given perhaps the unique moment that's governing the bilateral, what would you guys propose?

- So here is what we will do. Each of you have two minutes. Oh, so you pick and pick and choose whatever you wanna pick and choose and rest we address over dinner.

- Okay, let me take a stab and try and combine several of the questions. I think this talk of a G two is implausible, I think it's loose talk. There are structural differences between the United States and China, which cannot be overcome by personalities and the idiosyncrasies of a particular presidency. I, in the international relations tradition, I'm an unabashed realist. And consequently the distribution of power in the global system is much more important than the role of personalities. Personalities can override a moment or can be important in a particular moment, but the structural features of the international system are such, it is hard to visualize a G two arrangement between the United States and the PRC. We don't have enough time. That would be the subject of another conference and maybe we'll do it yet, but the prospect of a G two, which KY actually proposed originally, I think is a Kai era hedging. Yes, of course. It to some degree hedging is understandable. On the other hand, to quote Lenin, except in this case to reverse it, Lenin once said that the capitalists will sell us the rope to hang them. 'em turning to China for helping India's energy needs is essentially buying into Lenin's proposition. They will sell India the rope to hang India with. I can again elaborate on this perhaps on on the sidelines after dinner. Yes, for the moment, you know, Trump is, Trump's motto seems to be drill, baby drill. But there are structurally incentives that are going to lead the United States away from depend on its dependence on fossil fuels and particularly gasoline. Some may disagree, but I think that's the wave of the future. And it is very important not to give into this kind of irrational despair. And Rona can, obviously, something I said somehow alluded you because I referred to 1971 when the orders of the US seventh fleet were to sink any Indian naval vessel that stood in its way. We are nowhere near there today. This is not the Caribbean, that's not going to happen. So consequently, it's important again to quote David Apter not to be a prisoner of the moment.

- Thank you Sumit. Yep.

- Yeah,

- I, I think what we're seeing is the rise in, in my wife's parlance, she's the professor of engineering over here. She talks about uncertainty a lot. And I think that's what's characterizing yeah. Not just our relationships between India and, and the United States, but globally. I mean, there's uncertainty about what's gonna happen tomorrow. There's uncertainty if policies are gonna be whipsaw, you know, and it's not all the blame of technology. I mean some of it's human intervention and, and policies, but, but I think we're gonna have to come to grips with the fact that we're not gonna know for certain, and I think hedging is gonna have to be a part of how we think about these things. But it doesn't have to be pro or con. It's not, you know, okay, if I can't trust you fully, I'm gonna go somewhere else. I hedge against that, that relationship, you know, within the preserving the relationship, but perhaps adjusting its severity, its integrity and, and its dimensions. So what's changed? Self-interest has always been a part, but it gets back to what I talked about earlier. It, we've gone from a transactional conversation to a bargaining conversation in the, in the United States in a, in a very real, in a very real sense. And so the question now is there's been a, a perception created that America has been disadvantaged and taken advantage of. It's ironic because we always have decried the victim mentality in, in others. And now we're using it ourselves publicly as a reason to, to shape policies and the like. And, and the question that's being asked is, you know, in, in India's case is, hey, we've been helping India out for all these years. All they do is ask for things. What do we get in return? Now that's not fair, you know, the answers to that, but a lot of folks in Washington don't seem to be comfortable that there are answers to that. And I think that's gonna have to be a part of what's going forward. So we've gotta get back to something that I, you know, as I was saying, it's got to be a, you know, a negotiation rather than transaction. The non online 3.0. I don't see it happening. I mean, it's gonna be a different world. And you know, we talk about deglobalization, we're not deglobalization we're trying to deglobalize without China. That's what it is. And, and, and so the, the fact of the matter is that we're gonna need each other and, and, and those relationships are gonna be important. So, you know, a a standalone non-aligned, less economically advantaged that, that, that's not India anymore. And, and I would argue that in a lot of cases of the non-aligned, it's not them anymore either. As, you know, one of the benefits of what we have collectively been able to do since the second world wars, we've elevated in a real sense, more and more countries to the quote middle class, if you will. And their expectations are real and they wanna be a part of this. They don't just wanna be a benefit, they don't wanna take your large Yes. And your charity. They want to contribute and they want to earn and they wanna be a, a participating member. So I, I don't see a, a separate nine non-aligned moment movement in the, in the way that we, we saw it during the Cold War climate. I think you're exactly right. I think it's gonna be a reality, but this is a technology issue. Okay? It, you know, the, the transition that is underway slowed, perhaps unarguably slowed. It, it's, it's being challenged by technology and it's being challenged by costs, costs unfairly born by those that can least afford it. I gave a talk at, at Dallas, so apologies, Steve, you're gonna hear it again. But you know, when I got into the, the energy sector after leaving the Navy, it was the nuclear sector and I was told by a nuclear CEO Jim, you need to understand one thing. Nuclear is a business. It's not a religion. And if we can't, we can't subsidize our way out of this climate situation. We've gotta find a way to make this an ecosystem in the positive sense of the word, using ego where people can make a decent living, a decent profit and, and still have the outcomes and benefits that we all know ultimately are gonna be necessary to preserve the, the environment going forward. We're not there yet. We wanna be, you know, we've got lots of models that say we should have been there yesterday. You know, India's remarkable changes in terms of, of the, the emissions free generation and, and quite frankly, China's as well who leads the world in that effort. As you know, all those things are models, but you've gotta have grid scale storage, you've gotta have, you know, reliability of supply, you've gotta have grids that are restructured and remanage to, to balance the VARs. So you, you preserve grid stability. I mean there's, there's lots of things out there. This is not a hand wave and it's not an intentional delay, it's just kind of a okay, how do we make sure that we lay the foundation for that going forward appropriately. And I think we need to. Finally, I'll end with a quote from, from Steven Kotkin 'cause he's not here. And it's one of my favorite quotes from Steven. It's, you know, those that don't study history think everything is unprecedented. Thank you.

- Alright, thank you Admiral Ellis and Professor Ganglia for an exceptional conversation. I hope everybody found this illuminating, both in terms of opportunities and challenges, both for India and for the India US relationship going forward. So let's enjoy dinner. Thank you both for.