[Title] PM's speech at the Indo-Japan Business Luncheon Meeting

I am deeply honoured and mightily pleased to be in the midst of such an august gathering of leaders of Japan's business and industry. I take this opportunity to extend my gratitude to all of you who have found time to be present here today.

I have many cherished memories from my long association with Japan, not least the helping hand extended by Japan to India during our very severe balance of payments crisis of 1991. Japan was truly a friend in deed, to an India sorely in need. Those early days of India's economic reforms process now appear distant. It is important to remember that despite several changes of government in these past 15 years, India has remained on the path of economic reforms and liberalization we started in 1991.

The Indian economy is now on a new path of accelerated growth. For two decades our economy grew at around 6.0 per cent per annum. But in the past four years we have recorded 8.0 per cent annual growth. In the first half of the current fiscal year the growth rate recorded a new high of 9.1%. The manufacturing sector is fast catching up with the services sector. These two sectors account for almost 80 per cent of our national income.

This remarkable growth is being led by an investment rate of 31 per cent of GDP, financed almost entirely by a matching savings rate of over 29 per cent. India's stable macro - economic indicators lead me to believe that we have the potential to achieve double digit growth in the coming years.

Our challenge, however, is not only to sustain high growth rates, but to make this process inclusive of the demands of equity and environmental sustainability. Growth has already helped millions of our citizens to emerge from abject poverty, which is reflected in the decline of the poverty ratio from above 50% in the seventies to below 20% today. This has added large numbers to our booming consumer markets.

In this journey of unleashing the creativity and enterprise of the Indian people, and seeking growth with equity, we want Japan to be our active partner.

We are deeply appreciative of the assistance Japan has made available over the years, through its official development assistance programme. Delhi Metro is already a visible symbol of India-Japan collaboration and we look forward to more such projects that can make a tangible difference to the daily lives of our citizens.

In the years ahead we wish to focus on building a much deeper and wider relationship with Japan's business and industry. Our economic relations presently fall far short of the potential. I have been surprised to see Japan lose ground in India during the 1990s to other East Asian and South-east Asian economies, both in terms of foreign investment flows and trade flows.

It is a fact that South Korean consumer brands have moved aggressively into India and their brands have very high recognition value among our consumers. On the trade front, India's trade with both China and South Korea is booming and grew last year at around 40% with both countries. China's trade with India is nearly three times India's trade with Japan and Korea's trade with India is almost equal to Japan's trade with India.

The time has come for Japanese companies to reverse this situation. Japan must regain its historic status as our most important business partner in Asia. We cannot forget the critical role Japanese companies have played in the development of India's automobile and other industries in India. The challenge is before all of us is obvious. I invite Japanese Business Community to take full advantage of opportunities that present themselves in my country.

I am happy that there are indications that the trend is already beginning to change. Since the end of 2004, over $ 5 billion have been invested from Japan in India's capital markets. This is a ringing endorsement of the potential and profitability of investing in India and will, I hope, set the tone for greater direct investment as well. I am also told that the number of Japanese companies in India have grown by 50% in the last three years.

I do hope that you have noted the results of a JETRO survey conducted in 2005, which concluded that the profit prospects of Japanese manufacturing companies was the best in India as compared to all ASEAN countries. As a consequence, more than 90% of such companies in India were planning to expand their operations in the next couple of years. I urge you to weigh the initial problems of entry against the long-term profitability and stability of doing business in India.

An economically resurgent India today offers a variety of investment opportunities, both in traditional and new sectors, in labour-intensive and knowledge-based industries. In bio-technology, nano-technology, information technology, automobiles and aerospace, textiles and leather, marine products and in many other areas Japan and India can come together.

I am of course aware of the concerns Japanese investors have about doing business in India. Our government will address all legitimate concerns of investors. We are committed to improving our infrastructure, simplifying our taxation regime, reducing further our tariffs and eliminating bureaucratic delays. We have made substantial progress in each of these areas, but I am aware that there is more to be done. We will do our very best.

The focus of our government has been to create world class infrastructure in India. I am personally monitoring all the major infrastructure projects every quarter as head of the Committee on Infrastructure. We have estimated that India's investment needs in area of infrastructure will be at least $320 billion in the next five years in infrastructure alone. We have estimated that our total investment requirement would be closer to US$ 500 billion. This requires public and private, domestic and foreign participation in our economy. We happily welcome foreign investment and seek to promote public-private partnership on a large scale.

As part of such innovative public-private partnerships, we have made provisions for grant assistance through a specially created "viability gap funding" mechanism, and for access to long-term funds through a special purpose vehicle, the Infrastructure Development Finance Company. The qualitative and quantitative expansion of education in India will enable us to sustain a highly productive work force with a wide range of skills.

There are already more than 70 Indian software companies and 5,000 Indian engineers operating in Japan and Indian companies are making significant efforts to train software professionals for the Japanese market. Japanese has already been introduced as an optional foreign language in our secondary schools and the government is committed to increasing Japanese language learning opportunities in India. We would urge the Japanese industry to exploit India's IT advantage the way the US and Europe have done and are doing.

India's fast expanding economy will create a large demand for energy. There are many opportunities for collaboration between Indian and Japanese companies in the area of energy efficient and environmentally friendly technologies. We must exploit this vast latent potential.

Prime Minister Abe and I are sincerely and deeply committed to breathing new life into our traditional friendship. We propose to launch negotiations on a Comprehensive Economic Partnership Agreement between India and Japan.

I invite all of you to a youthful, dynamic and self confident India, where more than a billion people are seeking socio-economic progress in the framework of a functioning democracy, an open society and an open economy deeply committed to fundamental human rights and respect for rule of law. I invite you to join us in this historic journey of creativity and enterprise.

I am convinced that the 21st Century will be the Century of Asia. But to ensure this and to translate this into global prosperity and peace for all, Japan and India must work together. I invite you to join us to build a new India, a new Asia and a new world.