William J.

Powell: Okay, welcomeladies and gentlemen.

We will start this next session.

My name is Bill Powell.

I am the Asia Editor and China BureauChief for Fortune Magazine as well as a Senior Writer at Time Magazine.

Let me introduce our panelist as you saw it from the previous session you know wella familiar figure the Minister of Commerce Industry and Textiles here inIndia, Minister Anand Sharma.

Unidentified Male: Your voice is a bit low.

William J.

Powell: Sorry, I got to talk closer to the mic, speak closerto the microphone here.

To Minister Sharma's immediateleft is Mary Michael Nagu.

She is the Minister for State Investmentand Empowerment from Tanzania.

To her left is Balasubramanian Muthuraman.

He is the Vice-Chairman of Tata Steel and he is perhaps more importantly atthis session of course the President of the Confederation of Indian Industries a co-sponsor of this conference and thusour host here in Mumbai this week.

At the far end we have the Ministerof Agriculture form Mozambique, Mr.

Josֳ© Pacheco.

To his immediate right is Anil Gupta.

Anil is the holds the Michael DingmanChair of Global Strategy and Entrepreneurship at the University ofMaryland and he is a wildly published both author and columnist and to myimmediate left is Anoop Singh.

Anoop is the Managing Director for AsiaPacific at the IMF from Washington.

The IMF, I imagine is a prettybusy place these days.

The theme of our panel this afternoonis South-South trade.

It is the extent to which the developingworld and in particular India and its trading partners in Africa are ableto decouple as the expression.

The common expression has it from the restof the world keep increasing trade and capital flows even in the teethof extraordinary global economic headwinds.

We all know about the situation in Europe,we all know about the situation in United States which perhaps in slightlybetter shape than Europe at this point is also struggling to generate meaningful growth.

A critical fact to remember and I think it sets the template for this discussion that the so called BRIC countries (Brazil,Russia, India and China) this year will add roughly $2 trillion in nominalGDP to the global economy.

$2 trillion is the equivalentof one Italy.

So at the moment when the Italian economyis teetering and journalists like me all over the world are focused intensely onthe crisis in Europe in the BRIC countries growth continues and indeed is adding thefunctional equivalent of the third largest economy in Europe this year.

Minister Singh, excuse me Minister Sharma, my question is to you and it is simple.

Can this continue?Will it continue? Anand Sharma: It will.

It is because of the priorities thatother countries have identified recognizing also the potentialג€” both ofthe industry as well as our people and the imperative for our countries to maintainhigh growth rates not for years but for decades to insure that the benefitsof economic growth get redistributed in all sections of society benefits from it.

We cannot create that possibility with a doubt insuring that the economic growthis faster and if you do not have the resources then redistribution cannot take place.

It becomes a zero some gain that if yougrow and do not give it back to the people to the society.

Now then we look at the world in the backdrop that you have described.

Yes, there are concerns.

We cannot say that we are insulated.

I said in the previous session from what is happening in America, what is happeningin Europe, but that should not lead to a panic reaction odds.

We have shown resilience in the past.

Our economies rebounded quickly in 2008-2009crises that is continuing in fact the recession as suchis still very much there.

Now when we also look at the largerpicture globally, there is a shift that is taking place.

The economic activity and the economic output more and more is coming from thedeveloping countries and their emerging economies.

The BRIC countries which we are referredto which we belong be it account for 48% of the global GDP and the developingcountries as such is 90%, 85% of the world's population lives in our countries.

There is besides the opportunities andthe potential there is also richness of resources in some other countries,human resources which are integral to any country's growth, any institutions forward movement.

Now in the global context you will see that the changes that are taking placeAsia, Africa, Latin America has shown dynamism and in 2 years from now whatis projected that the economies of Asia, Europe and America is going to be equal sized.

So we are talking of 2 years, the rest of course it is how the growth momentumis sustained that will keep on changing the picture when it comes to theshare in the global GDP.

If you refer to what it is today, I haveno doubt in my mind that it will grow and manifold in the coming years.

William J.

Powell: Mr.

Muthuraman, fromthe private sectors standpoint what are the growth opportunities particularlythe theme of the panel South-South trade? What are the growth opportunities that yousee as the Vice Chairman of Tata in the southerner countries? We tendto focus on the BRICs (Brazil, Russia, India, China) but there arean increasing number of success stories in Africa these days, vibrant growth in manycountries across the African continent.

Are you seizing those opportunities? Balasubramanian Muthuraman: You know thereare I think two good reasons why the trade between emerging economies will growyou and faster in the future that what it does grown in the past.

There are 2 good reasons for it.

The reason number one is if you look at the western world what has happened orwhat time is apart from the current financial crisis due to the high debt burdenon many countries, which is also of course the result of consumption based economy.

What is happening with the western countriesis they have been gradually becoming competitive for many productsof course commodities they are already in competitive for even the medium and lowtechnology products they are uncompetitive so except for some very high tech itemslarge part of the Western Economy is uncompetitive.

And we must remember that irrespective ofwhat loss you have, what administrative mechanisms you have the fundamentalcompetitiveness of a nation is what is going to determine how trade is goingto flow and within who and who.

So the reason number one is the lack ofcompetitiveness in the Western countries.

The second reason why I think the tradewithin the emerging economies will grow even faster is because you can find thatas the Western economies over time have become increasingly uncompetitive whatis happening in the developing world is that the developing world for a long time havebeen just shall we say manufacturers losing low labor cost arbitrage.

So from being centers of manufacturing and centers of services purely based on laborarbitrage or the last 10 to 15 years they have actually become centersof consumption also.

They have become very powerful centers ofconsumption and they are large populated economies quite a number of them includingIndia and China and while the cost in these countries are also going up they arestill very heavily competitive so in terms of whether it is capable and theirbuilding capabilities over time.

So you have a mix of 2 things happening.

You have on the one hand there was general economics and competitivenessis going to force them.

If you see the actual numbers, I don't knowthe numbers exactly but I will give you some rough numbers.

The trade between India and emerging economiesif you look at the exports only 10 years ago in the year 2000 it was Ithink some 30%, today it is an excess of 50% of the total exports of India.

And if you look at imports 10 years ago it is about 47-48% less than 50% and today itis marginally higher than 60% in the total imports of India.

At the same time if you look at the same similar figures for the EU and theNorthern America actually there is a decline of about between 5 and10% over the last 10 years.

And I do believe that this is going togo on because there is a need for the emerging economies, they are upgradingtheir skills, they are upgrading their technology, they are making manufacturedproducts, they are becoming better in services and they continue to be competitivein many other products.

And if you are to ask me whether it willג€”whether it will make up for the loss of growth that mayג€” the western world willexperience I am not so sure whether it can make up in the short time, but as for another10 to 12 years it is perhaps not going to make up and beyond thatI think it will make up.

William J.

Powell: That is a clear point.

Minister Nagu I turn to you and ask simply those are fascinating numbers thatwe just heard those statistics are even more impressive than I had realized.

How do they evidence themselves in Tanzania? Do you see theevidence of the economic shift that Mr.

Muthuraman was talking aboutin Tanzania both in terms of exports of real and potential to Indiaas well as imports from India? Mary Michael Nagu: I will talk ofAfrica and then come to Tanzania.

William J.

Powell: Okay.

Mary Michael Nagu: If we look at the statistics when we tend to see that theshare of Africa's trade in the global trading is very small, hardly 3% and thatof Tanzania is hardly 0.

03 so you will see that Africa is lagging behind and itis lagging behind not because it is not trading.

Africa is trading but mainly in commodities.

William J.

Powell: Right.

Mary Michael Nagu: In their raw form.

And countries do compete on productivityand the productivity of Africa is low because of the low technology use andbecause of very little value addition and products are exported raw and on the otherhand we import goods of very high value.

William J.

Powell: Understood.

Mary Michael Nagu: You will find that kind of imbalance and that imbalanceis not only good to Africa.

It is not also good to the global tradingand therefore the economy of the globe.

So Africa has to pull up its socks.

We have to see to it that we add more value to our products before they are exportedso that at least we reduce that imbalance and the globe I think has a roleto assist Africa to achieve that and what Africa is doing now is to increaseinterested regional trading and also to increase trade between Africaand the emerging economies.

A country like India for example forits proximity to Tanzania and to Africa, you will find the cultures are also notvery different and therefore trading is partnership and partnership is easyand very convenient for cultures that are not very different.

So we look up on the emerging economies to enhance their trade with Africa, but notto continue with commodity trading but instead of commodity trading we shouldreally put more emphasis.

Africa has comparative advantage on agriculture.

William J.

Powell: Right.

Mary Michael Nagu: And we are faced byfood crisis in the globe and therefore everybody has to look to Africa, but thenwe also have to see to it, it is more than farming Africa has to undertakeagro-processing, agribusiness as a way of adding value so that at least that imbalance,that exist between Africa and the rest of the world and I do believe theemerging economies have a role to support Africa because at the end bothwill benefit from the trading.

William J.

Powell: Okay, Minister, I wantto come back to you about the specifically the ways in which the developed world andthe rapidly growing developing countries like India can specifically help Africabut on the point of agriculture it is a national segway to Minister Pacheco fromyour standpoint how rapidly are the opportunities to trade with India, withChina, with rapidly developing Southeast Asia, do you see it on the ground, whatare the opportunities and also what are the challenges these days?Josֳ© Pacheco: I think Mr.

Moderator.

Let's look to the south cooperationthe area where there is no problems.

We are on the area on the regionwhere we have a challenge.

Number one, we do have a competitiveadvantage on the national resources generally speaking.

If you look to the world crisis today on food shortage, on the water shortagein southern hemisphere we do have a comparative advantage.

What we need is to use on a sustainableway to move from the aid corporation to business corporations, to economic corporation.

If you look the locations India to Africa, we share the same ocean, maybe there wasa big earthquake millions and millions ago that split the two but in fact the tradebetween Africa, in India or in east, is already there for many years.

Number two, we are learning to be competitive around the world.

Let's use the competitiveness skills we are having as another comparative advantageso we can consolidate, we can improve the business.

The said issue the South Africa Corporation will have to strengthento building the team as one to come together to share our views, to share our resourcesin a win-win situation so we can overcome our problems, the challenge and we can competein the international market as one and to use our comparative advantage.

William J.

Powell: Professor Gupta, to you, how should multinational companiesin India look at developing Africa? Strategically how important can emergingAfrica be to multinationals in India? Anil Gupta: Part of it slightly broaderissue so I just look at the broader issue and then come to the role of multinationals,which is that in terms of South-South trade you know that storyis very clear you know to add to Mr.

Muthuraman's data that South-South tradeor emerging to emerging trade in 2000 was about 14% of World Trade and today lastyear was about 25% of World Trade.

I'm pretty confident that in another 15years actually that will be more than half of World Trade so I think the numbers arethere and the trend line is there, but I think structurally if you look at the natureof the South-South trade it differs quite significantly from the nature of saydeveloped to developed country to trade which is that the South-South tradeis largely either raw materials or finished goods.

Whereas developed to developed trade ismuch more an intermediate so you have much more integrated supply chains, integratedvalue chains and that is where the role of the multinationals and so I think thatwhat needs to happen in my view in terms of South-South trade is that not just lookingat trade but also actually looking at investment, you know because thelinkages between India and Africa are not just trade linkages, they are also linkagesin terms of investment and the investment linkages right now are muchweaker than trade linkages and I think that is where the role of the multinationalsparticularly and Indian multinationals which are phenomenallycapable at running distributed global enterprises or including in AfricaI think it is going to be huge.

William J.

Powell: Anoop Singh from theIMF's perspective you said that earlier as we were talking before the panel that youthink there are lessons to be learned in India from the China experienceand particularly the demographic transitions that the two countries are now undertakingwhy don't you address that.

Anoop Singh: Okay, Bill, thanks very much.

I think this is an important point.

The previous speakers have spoken aboutthe importance of trade for growth and I think this is particularly important nowfor India and for virtually all the other countries in South-South.

India is going through a demographic transition.

It is incredible.

It had started years ago, but if you look ahead through the next 30 years notjust India but in other countries in South-South too, but in India ֲ¼ ofthe increase globally of working population will be in India 1/4.

William J.

Powell: ֲ¼ wow.

Anoop Singh: And this is a demographictransition that China has gone through.

China is tapering off, India is consolidating.

So we are going to have people at working age where 300 million more people in theworking population in India in the next 30 years so the reason I bring is up is itis good for economist say from a factor point of view, we will have more labor.

We have seen in other regions, that is not good enough, we need jobs.

And what we know from China is China went through this demographic transition.

What did China do? It did so many things but at least one thingit did, it fundamentally increased its trade integration around world.

It boosted export oriented industries that had the jobs and that is what China did.

If you look at research available, it bares out what Minister Sharma had justsaid research points out looking at India's experience too that it istrade integration that really gives you the productivity increases your need to createjobs to create markets so the point I am seeing is India is going througha remarkable demographic transition.

India is going to have a huge number ofnew people working in the working age population and the research tells us andChina tells us that nothing is as important as international trade integrationand this applies across South-South.

William J.

Powell: Good, good.

Minister Sharma, I want to follow up withyou referring to a point that Professor Gupta made about how we need not justincreased South-South trade but increased South-South investment direct investmentto build the supply chains that he was talking about.

Do you expect that to happen? Is it happening and as a subset ofthat question China as we all know has been very aggressive through its state-ownedcompanies investing in Africa, India a bit less so do you think we are going to seea shift it all toward increased outbound Indian investment toward Africa? AnandSharma: You see firstly, let me briefly sum up the trade issue whatother unless it is spoken.

The South-South trade is increasing.

It is true that the quality maybe different from as Mr.

Gupta was sayingfrom the quality of the developed country's trade, but it is changing constantly and among the developed countriesif the trade in the last decade has increased 4 times amongst the countriesof the south it has multiplied 10 times.

Also, when I look at the numbers forexample India's engagement, we do not have as it used to be many centuries ago Indiabeing a major trading country of the world, the largest to be precise.

Today our share in merchandise trade is little over 2% and all put together servicesand merchandized trade is close to 4%, a little over 4%, that is notadequate because we have 1.

2 billion people, but of the trade that we have $600billion we crossed last year two-way trade more than 50% $315 or $320 billion is –trade only with the developing countries and it is increased.

So this major shift that is taking place not that we are not engaged withthe traditional markets so their destinations particularly the developed countries.

The second issue is about the quality and how value chains are created Africa,Asia and South America are getting more and more integrated with the global value chains.

Another important aspect which has been underscored repeatedly as Mr.

Anoop Singhonce said is about the population and that is in Africa too that large number ofyoung people simpler for that matter in Asia, this is where the future is.

Third, the resources, I do not say that we are not clearly following what are the trendsin Africa, but we work with Africa very closely as well as Minister Nagu hadsaid she was absolutely correct that we understand each other.

We are not strangers in history we had shared similar challenges.

We have also the same past ofmissed opportunities when our countries were left behind after the harnessing of the steampower which transformed Great Britain and then the industrial revolution andall the technologies which came.

Today we have straddled that divide.

The new wave of technologies which came, we moved fast enough to acquireglobal leadership positions.

Now consumption production patents are different.

In China, it is different, in India it is different, in Africa it is different,but Africa also is moving very fast towards regional economic integration.

Then you look at directs Africa, whether East-Asia community whether EastAsia Community, whether SACU, ECOWAS and we work therefore in understanding with them.

It is true that China and India do not have, we have resources, but we do nothave the same resources for all the resources that we need for a developmentparticularly when it comes to energy security or some of the precious metalsand minerals where Africa and South Americas they have abundance of those resources,but what India is doing is sort ofג€” I do not want to use word aggressive,it is intense engagement because what our philosophy is to be truly a friend andpartner in Africa's progress so over decades when India did not have enoughresources to address the monumental development and challenges of our own countryto invest in education, to invest in economy.

We did share our resources, our experience with our brothers and sisters in Africa 10of thousands of Africans who have come from 60's onwards on Indian scholarshipsto join our professional institutions to go back as teachers, as doctors, as engineers.

Now that has increased 2008 we had the first India Africa partnership summit inNew Delhi and the second one was Addis Ababa this May.

Now we have focused on capacity building in Africa our companies board the publicsector in the private sector are very much conscious of the ethics to create jobs there,to empower people by training them and this capacity building embraces allsectors from every culture to education to manufacturing.

Investments are also taking place.

Indian investments, in Africa when I look at it figures are very difficult sometimesto get because the corporates have multinational corrected todaymany of the India companies.

They are investing arms in different countriesor locations, but also what directly goes from India.

In Africa, it could be anywhere between 35 and 40 billion in recent years the Indianinvestments have gone in and I know for a fact that many of the proposals are inthe pipeline so we will see that this investment is growing and that is also inthe long run — that the quality of trade changes as Africa will be able to providegainful employment to its younger people and what is manufactured out but thevalue addition is already taking place.

It is not only the raw materials, sometimesof course it is a two-way process what the country has and whatthe country needs because India also is exporting what we have.

Another important area as I conclude is about the food security an idea I didrefer to because that is a challenge which has resurfaced again with very high globalprices with commodity and food.

The same level as 2008 and the food inventoriesare very low so agriculture again Africa is very fertile soil,many countries have been including Tanzania and Mozambique and other countries and we areengaged therefore in agriculture in a big way in diversification, in irrigationso it is this engaged.

Another enabling thing which earlier hasbeen doing and we have now increased that because of our own economy has drawn andwe had more resources than to share the friends in Africa that is our lines ofcredit so it is $5 billion that was in 2008, another $5 billion and now 2011which is available for development and project to our friends in Africa soif you have looked at what is America's engagement with Africa that is different,what is China's engagement that's different, what is India's engagement, ithas its own character, philosophy so I will say it is distinct and different andit is a relationship which is based on trust and confidence.

William J.

Powell: I want to come to Minister Pacheco in a minute to follow upon the agriculture point, but first Mr.

Muthuraman just quickly how would youג€”wearing your CII hat, how would you characterize your membership's attitudesand views toward the possibility of outbound direct investment to the southare we going to see that clearly a trend already, is it going to intensify? Balasubramanian Muthuraman: Yeah, well Iwill send the question I also want to add to what my Minister said.

You know there is as I said earlier there is going to be more increase trade betweenIndia and the South-South, between India and the emerging economies.

Similarly there is also going to be increased investments between these economies.

One is seeing it already.

India has Indian companies in my viewhave some inherent advantages.

One is unlike what is happening with someother countries we are not going to Africa just to remove the raw materialsaway and bring it home.

We are not going there for that.

We are going there to participate in that countries growth.

For example, I know of cases that Indian companies have gone to say South Africafor a coal mine, but with a promise to establish a part plant there.

So there has to be a win-win situation for both the countries.

If you go with an approach of you lose and I will win that relationship is goingto last long and over time I think Indian companies have established this credibilitynot only in South Africa and also a few other countries so I believethat investment will actually grow.

Secondly, there is a point that is beingmade about the South-South trade has been in tally on raw materials and not hasdone finished products and my Minister made also valuable comments on that.

I just want to add.

It really does not matter, it really doesnot matter that gross level as to what you export, but the country should worry aboutwhat it is exporting and a gross level really doesn't matter.

The reason for that is you know all countries are not in the same stage of development.

If you want to convert raw materials into the next level of product there is a skillrequired, there is an investment required, there is a technology required.

If you all convert it in value and even more, you will require even more skills, you and more skilled people even higherthat said you and I are technology.

So there is a natural progression ofa country's development and what are the exports are and what did the imports needto fit in to that natural progression.

Some countries can warm that progression first.

So I am not pretty clearly against and under the developed country or countrywhich is just on the first one or two legs of the journey to be exporting raw materialas long as it realizes quickly that it needs to do something on differenceof scale and technology and research and so on together withthe next stage of manufacturing.

But I can tell you the investments andas well as trade between this South-South countries within the emerging economiesis going to increase seven-fold and what is happening in the global as it is underthe global economic and financial crisis in the last couple of years is actually going to accentuate that.

William J.

Powell: Yeah, yeah.

Mr.

Pacheco,do you want to follow up on the comment specifically about agriculture?The numbers are obvious we have 1.

3 billion people where I live in China.

There are 1.

2 billion people here in India.

Those are a lot of mouths to feed.

You have global food shortages.

We have had generally speaking rising prices.

There aren't many more critical issuesglobally than increasing agricultural productivity Is that happening in Mozambiqueand to what extent are foreign multinational agribusinesses not justfrom India but from the United States and Europe as well? how activeare they in investing in your company in your country and trying to driveup agricultural productivity levels? Josֳ© Pacheco: Look for the agriculture.

If you look to Africa we have arable lands.

We are not using enough, we are using around 30% in average because of Mozambiquewe are using 10% of our arable lands and that 30% around African, 10% ofMozambique the productivity is very low on the land we are using so there is aroom to increase the productivity.

Plus, there is a big room to use theremaining arable land available in Africa.

In the case of Mozambique, we are promotingand attracting investment on agribusiness to increase productivity onthe research side to do more research to adopt results that is already reached thecountry like India, Brazil even China due to the similarity or some agri-ecological conditions.

Some technology can be adopted there.

I see company moving to Mozambiqueto investing and our goal is number one, productivity and research play very key roles.

We have to educate more our research scientist.

Sometime if you go to research station,they have solution for any agriculture problem you have.

They would show you, they would make a fair but how this technology canbe transferred to the farmers.

So the extension work, the extensionservice should be in place to make sure that the technology generated by researchis going to be accessible to the farmers.

And the multinational company on seedside, on agri-chemical, they can play a very important role.

We are having experience to trythree lateral cooperation; Mozambique, Brazil and China.

If you look at Mozambique, Brazil and Japan, I'm sorry.

If you look to the location of Brazil, if you look to the development that is takingplace in Brazil 30 years ago Brazil was facing shortage of food, but now the jobdone in Embrapa Brazil now is one of the most playing the key rolein the world food basket.

We are working with Embrapa.

The Embrapa, they had just opened an office representation in Maputo I wastalking with honorable Minister of Tanzania, how can Embrapa being inMozambique we can work together.

This is a kind of operation we can maketo both productivity on the land we are using and to use the remaining arableland that is not yet used in Africa.

Water is there.

You know, you have a situation that 1 month today the people claim about floods.

In 10 to 15 days they will claim about drought, but the river is crossingג€”is passing by how to use properly the water resource we having to boost agriculture?This is 1 area that we can explore.

We know that India have got quite alarge experience on management of water for agriculture for industry and this is therooms that we should take and come together as one to use the potentialand sustainable way.

I do believe if we do that we have tostart yet in fact we should start or should have start yesterday, but weare already late, better late than never.

If we don't start immediately, we willend up on facing food shortage.

William J.

Powell: And Minister that followson from a point you made earlier that I wanted to come back to you on, whatare the other ways in which the rapidly developed, rapidly growing countries inthe developing world and for that matter the west can help Africa, that is avery specific, very interesting example the utilization of water resources in order todrive agricultural productivity levels higher.

What are other examples that cometo mind from where you sit? Mary Michael Nagu: Well of coursethe potential of Africa and that of Tanzania lies in Agriculture and therefore we placea lot of importance in agriculture.

William J.

Powell: In that industry, right.

Mary Michael Nagu: First, Africa itself is faced with food crisis.

We need to have food security in Africa.

We need to have food security in the worldand Africa is a big potential and you cannot separate the importance of investmentfrom trade or from industry and therefore where the South-South cooperation can be enhancedin Africa is an investment.

William J.

Powell: Okay.

Mary Michael Nagu: And Africa is trying its best to attract investments not onlyfrom the developed countries but from the emerging countries which happen to bewithin the South-South cooperation.

I was talking about value addition.

I was talking about Agribusiness and this is where the investment is required,but Africa also has potential in many other areas like we have natural resources inthe form of coal, iron and many other materials and we need investment in that area.

We are trying to reduce cost of doing business in Africa.

We are trying to create our own middle class because the effective demandhas to start with Africa.

We have more or less the same populationwith India and China.

The only difference is thelack of effective demand.

The lack of entrepreneurship andif investment do come to Africa the Africans will tend to learn from the South-Southcooperation in order to enhance trade in order to increase the share the trade forAfrica in the global trading investment is very important in adding value in theexploitation of the resources which happen to be many, but the ability of Africa toexploit those resources are notג€” is not there.

The only thing that Africa is looking foris the win-win situation Africa cannot continue trading while it is losing it hasto gain from the trade and if the global economy is growing that of Africa has togrow as well and the tendencies there.

Most of the African country's economiesare growing and if the South-South cooperation is enhanced and the developedworld is also brought into Africa, the issue of global food crisis, the issueof energy crisis will be kind of limited because Africa has that potential.

The only thing is Africa would not like to lose again within the global trading.

William J.

Powell: Now those are all veryfair points Anoop, I have noticed you scribbling notes, would you get in here? Anoop Singh: Well I think as we have heardfrom the speakers trade is growing South-South.

There is a lot of scope for it to happen, but maybe I should just make one ratherobvious point here where India is obviously in South Asia and as the Ministerjust said India's trade across regions has grown.

If you look at India's trade with emerging markets and I guess South-Southis a major component of that it is a doubled 15 years, but if you lookat India's trade in Asia, it has not increased in the past 15 years.

Now maybe it can be measured in some other way a third country trade, but what I wantto point out is some of the research I recently read on the way here.

They were trying to look at India and saying where is the greatest potential forIndia's trade to develop in the next 20 years and it is not surprising butthe research tells us that the greatest potential to quadruple in the next 1or 2 decades is within South Asia.

There are many ways to see this.

If we look at India's share of GDP in South Asia, it is huge, it is 80%.

William J.

Powell: Right.

Anoop Singh: If you look where South Africa is in Southern Africa it is as big.

You look at how much trade in Southern Africa is with South Africa it is huge.

If you look at the percentage of GDP there is South Asian trade it is 10%.

And this was not a political point from all economic criteria the growth spilloversbenefits to India and others of rising trade are undisputed.

So I would say the greatest potential we face is to raise trade in South Asia andI will make a final point Bill, we are talking about trade.

It is not only trade.

In more regions at most financial,remittances, services, knowledge so trade education is just one aspect of total integration.

William J.

Powell: But surely the primary factor limiting South Asian tradeis political, no, it is geopolitical? Anoop Singh: I would say equally from mypoint of view equally important are the economic benefits.

This are undisputed and we should focus on the economic benefits because thatis what I think is most important.

William J.

Powell: Minister, you want toג€”? Anoop Singh: We are doing the points which sort of Singh has made is very valid.

Much is happening in our region.

It is not that the trade has not increased,but it is well, well below the potential in South Asia.

We have taken a number of steps India being a large economy in the SAARC frameworkand the SAFTA that is a trade agreement of the South Asian countries.

Afghanistan has joined SAARC so Afghanistan is now part of the SAFTA process.

India has adopted an approach of asymmetry and reducing tariffs to large extentto giving access to Bangladesh, to Nepal, to Pakistan and there is a forward movementwhich is a very welcome development between India and Pakistan.

The trade within the region India's own trade is close 17 billion, but South Asiaslowly is moving towards realization of the benefits of economic growth andtrade because that alone will bring about stability when they younger people findgains of trade as well as economic development.

India is also very clear that as we areintegral to the process of Asian economic integration as member of the East AsiaSummit the ASEAN plus 6 process India is very much there, but South Asia also hasto move towards integration and eventually be as a region part of this emergent pictureof Asian economic integration which has taken place elsewhere in theworld when we look at North America through NAFTA, South America's– and — in Africa.

Therefore, the steps that we have in mindwill help us to achieve that objective.

It is also very clear that India does notwant to raise a head on its own, but take in a brotherly embrace the entire regionfor economic growth and shared prosperity so hopefully a few is down the line whenwe discuss the subject it will be a different picture.

I did mean optimistic about it.

There have been historical reasonsfor why it didn't happen earlier.

The pains of partition, the violence,the bloodshed that followed and the issue was also a trust and many of the countriesof South Asia have been going through different kinds of upheavals.

You know Sri Lanka until very recently it was valiantly destabilized.

You know the challenges in Pakistan which have been there or the challenges whichBangladesh has faced or the turbulence in Nepal hopefully things are settling downand even in Nepal there is very positive developments recently and I am looking forwardnow to the next SAFTA Ministerial which Pakistan will be hosting.

We hosted Pakistani Commerce Minister and the delegation.

I was told that was the first with it unfortunately but happily so it took morethan 3 decades for that to take place and they came with a big business delegationand there was discernible enthusiasm.

The business leaders of border countriesand I saw the same when we went to Bangladesh.

So my only message is that this region shall also change for the better.

William J.

Powell: That is a spot on point that you made Anoop.

I want toג€” is my mic on, yeah okay.

I want to step back and broaden the lensa little bit since one of the points that we are address on this panel is the extentto which the South-South trade and economic relationship can continueto build in the midst of what is globally a very pour les moment.

Now I tend to be unfortunately aborn pessimist, some people are born optimist, some people are born pessimistson the later camp.

I think Europe is a disaster.

I don't think the Euro or the Euro zonecan survive in its current form.

I think what we see is what we get in theU.

S in terms of growth for the foreseeable future.

If Europe falls into outright recession and the Euro zone doesn't survive inits current form and the United States continues to just plod along at 0 to 2%growth what are the implications for the developing world, both South Asia, SouthEast Asia, East Asia and Africa? How badly will they be hit under aclose to a worst case scenario? I will tell that to myfriend from the IMF? Anoop Singh: Alright, thanks thisis also very crucial point; just before I start I will be brief.

In the last 3 years the global crisis hitus, trade among emerging markets continue to increase and then fall, but now let'slook at the next 5 or 3 years beyond what happens next week or next month.

I would say whatever happens it is quite clear that emerging markets developingcountries South-South, we are not going to be able to rely on external demand fromthe U.

S and Europe as you said.

William J.

Powell: Right.

Anoop Singh: That is a reality which we have to recognize, but emerging markets,India, China and many in South-South Brazil are leading the globaleconomy right now.

So we have to understand the next 5 or10 years it is trade and growth among emerging markets, among developing countrieswithin South-South that is going to be crucial not only for keepingthe momentum of broad high in our countries but also in the global economy and thereforeall this crisis tells us because the time has come to rebalance ourselves,to focus our efforts, our investment and our target of markets in other emergingmarkets and look a little bit beyond relying just on Europe and the U.

S for markets.

William J.

Powell: Fair point, let me go to our audience and see if we haveany questions for any of the panelists from the audience.

Okay, here we go here is one right here.

Unidentified Male: I would like to highlightwhat you just said about things going on in Europe and that Euro zonefalling apart as well as the American economy being very stagnant over the next decade.

I would like to put this question to Mr.

Singh that, not an economist but I thinkthe major problem behind all this is the minimum wage rates which is making thebest in economies very uncompetitive.

So should not there be considerationregarding reducing minimum wages in the Western countries? William J.

Powell: I think the questionis I understand should the Western countries of the U.

S and Europe lowerminimum wages, lower minimum wages in order to become more competitive? AnoopSingh: Ah alright we are looking at a very important point as we look beyondthe current crisis that is taking place in the financial markets, debtmarkets and sovereign risk.

The most important factor for the vitaleconomy is to improve the growth outlook.

That means structured reforms which includebetter debt sustainability and a lot of the discussion that is not takingplace in Europe is how to establish the structure reforms that reestablisha growth outlook that is positive.

It is not just wages.

The broader structure forms are being discussed.

They will be needed because both for thesake of Europe and for the sake of emerging markets we all need Euro comingback to a positive growth outlook.

We need it.

William J.

Powell: Do you want to get in here? Balasubramanian Muthuraman: Yeah,I had a comment on that.

You know the problems of Europeג€” I'm notan economist or I am not a finance guy but looking at it from a businessman's pointof view the problems of the Euro zone or the problems of the U.

S cannot be solvedby financial restructuring alone, which is what is just now being attempted.

There are far more fundamental structural reform that is required and one of the most fundamental reform is you don't lookthe problems are because of human behavior.

They may look like financial problems oreconomic problem but they have behavioral problems.

Behavioral problems in terms of consumptionand behavioral problems in terms of savings, these are two behavioral problems.

Any country which is going to continuously consume more and more andmore compared to the wealth it creates cannot be a sustainable thing whateverfinancial restructuring that you may do.

So I do believe that over time both Europeand the United States with a lesser extent actually has to change the consumptionbehavior and then because there is no easy solution to my mind forthe current problem and that is a very painful thing and more attempts to sortof implemented is going to get sacked.

So you will find a lot of things that aregoing to happen in those countries where you have 1 term Prime Ministers and 1term presidents and she or he will try and implement something and he will become unpopular.

I see a journey of that nature.

William J.

Powell: Professor Gupta?Anil Gupta: I think in terms of the wage rates in the U.

S you know particularly ifI look at the U.

S or reducing the minimum wage I think it is politically possiblebecause in any case over the last 20 years the divide between the rich and poor hasincreased and so you have the occupy Wall Street movement so in reducingthe minimum wages is out.

Now that said I am actually more optimisticabout the U.

S economy than many other people because when I look at forinstance the trade picture for the U.

S.

Of course been running a huge trade deficitand you know one can look at it instead of problem on the export side orproblem on the import side and of course you know U.

S is a big oil importerand so that is a big contribution.

Now if you look at some of the latest analysison the oil situation you know Daniel Yergin you know is kind of theworld's number one expert and you know his recent writings are that essentially overthe next 20 years that would be the shale gas for instance and so the picture ablechange dramatically and the U.

S will become far more U.

S dependent on oil andgas than dependent on foreign sources and so if that were to play out and havehuge positive impact in terms of the trade picture for the U.

S.

William J.

Powell: Any questions righthere gentleman in the center right here? Ken: Ken – of Creative Health.

So the picture described by a number of the panelist Mr.

Muthuraman and Mr.

Gupta, why can we not just simply assume that with Europe, the U.

S de-leveraging consumingless you know there would be a new equilibrium but which the breaks plusAfrica that is more than half the world's population with enormous pent up demand.

I'm just going to you know increase the trade and therefore the fact that a countrylike India or China might trade less with Europe and U.

S would not reallybe a problem, we more than compensated by the South, the increasing South-South trade.

Anil Gupta: It is not very clear.

William J.

Powell: I'm sorry could yourepeat or rephrase the question.

Ken: The question is why worry so muchabout a decrease in consumption in Europe and U.

S which is going to happen anywaybecause the solution is in vastly increase our South trade.

William J.

Powell: Well in theג€”I'm sorry Mr.

Minister.

Anoop Singh: You conclude first.

William J.

Powell: Yeah from where I sit, I sit in China and indeed the fact is eventhough growth is slowing in China the pace of consumption or consumption share of theGDP albeit from a low level is increasing and it is increasing very rapidly similarlythe trade surplus is despite all the stuff we here about China bashersin Washington and the U.

S and elsewhere obsessing about the current account deficitfrom the U.

S standpoint is down to 2% of GPD in China.

The surplus is coming down and consumption is increasing so I think hemakes a very valid point.

Anoop Singh: Let me just makea very quick comment on that.

I think it is a reality if you go backlast 20 years with China's growth.

It has come from investment infrastructureand other sectors.

China has a new 5-year plan.

They also have 5-year plans.

There were 5-year plan and the 12 5-yearplan has one principle objective raise consumption, as Bill said consumption ratiohas begun to increase, but you look back 10 to 15 years the ratio of consumptionof GDP and China has fallen.

Now as you look at next 10 to20 years it has to increase.

This is part of the rebalancing thatis taking place from relying on external demand from the U.

S and Europeto consumption in China.

Anand Sharma: Just to add there is apatent of growing consumption in the emerging countries and the developing countries,it is true that because of the challenges that U.

S and Euro zone isfacing, there is going to be some stagnation and fallen consumption, but thefact is that in Asia the total consumption until recently just $7 trillion whereasthe U.

S alone the much less population are $10 trillion of consumption.

Now in the next decade if you U.

S will move to 15.

She will move from $7 million to minimum $20 trillion of consumption and then welook at this country in India in fact our economic growth is driven by domestic consumptionand domestic production so there is a different pattern.

And I entirely agree with what you have said and Anoop Singh that China now haseven in the meetings which we have can wade with clarity that their emphasis willbe on raising the level of domestic consumption and the same is happening whenI look at Africa with the economic growth, the domestic consumption is growing.

So it is in the context to the South-South,it is very relevant, but in the two summit up.

When we look at the global picture 7 billion is the world's population where do85% people live so they have to consume.

If their share of the global consumptionis not even 1/3 then this is a sad commentary and with that it is whathas to change which is changing.

Mary Michael Nagu: I wouldn't like to saymuch what I wish to see a little about the consumption level.

It used to be in the past populations where liability, but currently in thepresent situation population has tend to be an asset especially when ithas the purchasing power.

If you look at the globe India, China hasmore population than Europe and the United States and since their progress is basedon domestic demand and in the past I'm sure Europe and the United States werealso finding potential in the population within the emerging economies now they arecompeting and if the productivity are not similar then of course the emerging worldwill be taking out of the effective demand and especially it is from within their own countries.

And the more that that has made the United States and Europe become progressג€” Imean brought progress is not similar to the model that has brought progress to theseemerging economies so I think that there is a lot to learn from each side.

We need to learn from Europe and the States and we need to learn from theemerging economies and especially when the reasons that brought about higher productivityand higher success when it comes to economic growth within theemerging economy is different from those which has brought progress to theUnited States and America.

And we have alternative, now we have morescope from where we can live and hence there isn't why we should increasecooperation within the South-South and with that of course the globaleconomic prosperity will have to increase.

William J.

Powell: Professor Gupta? Anil Gupta: Also I mean, I think in theshort term Europe matters because you know the banking system in Europe and U.

Sis highly interlinked so if there is implosion in Europe it is goingto severely affect the U.

S and if you look at U.

S Europe combined they are 50% ofthe world's GDP right now and so therefore that is hugely important for everybody inthe world, but if you look ahead 10 years from now I think the picture of it lookvery different because 10 to 15 years from now Asia's GDP will be equalto U.

S and Europe combined.

And so at that point, what happens in Europethey would be relatively speaking more a regional challenge ratherthan a global challenge.

William J.

Powell: Okay, we are sadly rightat the end out of time here and I must say as someone who is born a pessimistI am someone assuaged by what I have heard by what I have hear on the panelthis afternoon despite the near term turbulence that we are going to see inthe developed countries, the prospects for South-South trade and continuedeconomic integration are not only positive but frankly it is almost inevitable just asprofessor Gupta said, the world 10 years from now is going to look very differentthan it does now and fingers crossed it is going to look better not worse.

Thank you to our panelists and than you all for attending.