Speeches & Articles

Remarks of Consul General Beth A. Payne
American Investor Interest: Positioning West Bengal
AMCHAM Panel Discussion
July 11, 2009

July 11, 2009

Mr. Aniruddha Lahiri, President AMCHAM
Mr. Vir Sanghvi
Fellow panelists
 
I would like to propose that West Bengal look at private enterprise and free markets as essential elements for economic growth.   In environments that encourage free enterprise and healthy competition, we see the most innovation and creativity and the most efficient productivity.  This leads to greater economic growth and a better quality of life for a wider range of people.
 
Like most powerful elements - for example the essentials of water and fire - capitalism and free markets can become destructive when left unchecked.  This is where an effective government comes in; government regulation and intervention when necessary can limit the negative impacts of capitalism while preserving the benefits.  And, just like tending a fire or controlling a river, the struggle to find just the right balance is constant and sometimes we do too little and sometimes we do too much.  The U.S. Government is currently struggling to find the appropriate balance between the free market and proper government oversight, after seeing the damage untamed capitalism has done to our economy. 
 
Because of the U.S. economic crisis, which quickly became a world crisis due to globalization, some people are questioning whether free markets and capitalism add value to society.  Just as few people would ever advocate letting a river run dry just because it floods from time-to-time, I would like to caution against rejecting the benefits of capitalism and the free market because it was left unregulated, broke its banks, and caused temporary damage to the economy.   I believe that a properly regulated market-based democratic capitalist system still ensures the greatest good for the maximum number of people.  If we get our policies right and find the right public/private balance, investment will flow and our economies will flourish.  
 
Over 100 years ago, Karl Marx predicted that capitalism would fail because it would lead to excessive greed.  We recently learned in the U.S. that when greed is allowed to flourish and we forget our core values and that good ethics is good business, the economy will suffer.  As Mahatma Gandhi once said "capital as such is not evil, it is its wrong use that is evil."  So, another important aspect of building a healthy economy is to make sure that the values and ethics of a society are maintained.

So, how can principles of the free market benefit India and more specifically West Bengal?  Today, more than 70 percent of India's population has no access to banking or financial services.  In my experience, the lack of affordable capital harms farmers the most because without an effective banking system, they are forced to borrow from informal money-lenders at high rates to purchase inputs leaving them with barely a profit from even good harvests.  One of the secrets to America's continued economic strength is the availability of small loans to small farmers through financial systems such as Credit Unions, something that a more open and liberal financial services sector could possibly bring to West Bengal.

West Bengal is well known for having a well educated and intelligent population.  Yet, despite having some excellent academic institutions, there is a huge, un-met demand for more and better education.  Hundreds of students move to other cities, and even other countries, for higher education.  Others who cannot afford to move simply do not reach their potential because they cannot access affordable and quality education.  While in America, the government role in education is essential, we have also seen that the private education sector can effectively fill in the gaps and helps ensure that our education remains cutting edge and relevant.
 
There are many American universities that are interested in partnering with government and private sector institutions in West Bengal.  However, current legal restrictions limit their investments and activities, and therefore limit the educational options available to local students.  A more open and liberal education sector would promote greater cooperation between Indian and American educational institutions, provide opportunities for U.S. Universities to set up campuses here, and help give young men and women a chance to receive affordable world-class education here in the West Bengal.
 
Foreign Direct Investment in retail can also benefit the people of West Bengal.  With open competition, Indian consumers will enjoy greater convenience, lower prices, and a wider selection of products.  More competition can also be a catalyst for increased efficiency across the entire supply chain.  For example, an estimated 30 percent of India's agricultural output spoils before it reaches the market.  Competition in retail could help change this because it would create more efficient supply chains and guarantee that West Bengal's agricultural produce is still fresh when it reaches the market and can command the prices Bengali farmers deserve.
 
The United States and India already have a proud history of cooperation in agriculture.  Indeed, India's Green Revolution stands as one of the greatest legacies of our bilateral relationship.  Today, West Bengal's agriculture sector could benefit from a second revolution.  A move from supply-driven to market-driven production could enable farmers to add more value to their products so that their incomes increase while production grows.  Collaboration in the agriculture sector can help harness the benefits of fresh ideas, cutting-edge research, and new technologies to increase productivity and growth.
 
An excellent example of cooperation that is already successful here in West Bengal is PepsiCo's Frito-Lay food processing plant just outside of Kolkata.  When PepsiCo came to West Bengal in 2004, it introduced a partnership-farming concept, with clear and fair contracts.  It joined village-governing bodies to encourage farmers to form cooperatives.  Since 2004, farm practices have improved and West Bengal now has one of the highest yields in India among Frito-Lay-assisted potato cultivation.  Banks are extending low cost credit to farmers because they trust the Frito-Lay-farmer partnership contract.  And, the bottom line is that farmers are earning more profits.  Farmers told me that with the extra profits they are renovating their homes, sending their children to school, expanding their farms and even buying laptop computers. 
 
American companies like PepsiCo, Ford and GE respect the laws of the land, do business with the highest degree of ethics, honor contracts, bring in modern techniques of production and management, create jobs, provide safe and healthy work environments, and display exemplary corporate citizenship.  They can bring to West Bengal all the benefits that come with free market capitalism.  And, I can assure you that they will respect the values, ethics and government regulations that you put in place here in West Bengal to reap those benefits while minimizing the costs. 

Thank you.