Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 11 - Evidence
OTTAWA, Thursday, November 4, 2010
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 11:35 a.m. to study the rise of China, India and Russia in the global economy and the implications for Canadian policy.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, we are here to study the rise of China, India and Russia in the global economy and the implications for Canadian policy. We have completed our witnesses and have had a very, I believe, successful trip to India, touching some of the major issues and areas that we intended to in our report. We were well received, and we had a good opportunity to test some of our assumptions and theories and to hear new ones. All in all, while senators will have different perspectives, I think we can say was a successful venture to India.
We have had the High Commissioner before us before, but quite some time ago. This is a good opportunity for High Commissioner Gavai to give us any other parting thoughts about what he has observed in Canada and in India that may be helpful to our study.
I welcome you to the committee again. You appeared the first time on April 1, 2009. You have been part of the Indian foreign service since 1975, and since then you have served in several important assignments in India, as well as serving in diplomatic missions in Yugoslavia, Hungary, Zimbabwe, Indonesia, Germany, Scotland, the Maldives, and in Houston more recently, in the United States.
As your current position here in Canada as High Commissioner is a very high profile position, it speaks highly of your professional experiences in the past that you have been posted here.
In talking to some of your Indian colleagues, this is an important post for your country, and we are very appreciative of your presence here.
I think what is left for me is to simply say happy Diwali for tomorrow and to invite you to comment. Then I am sure the senators would enjoy the opportunity to exchange questions and comments.
H.E. Shashishekhar M. Gavai, High Commissioner, High Commission of India in Canada: Thank you very much, Madam Chair, and honourable members of the Standing Senate Committee on Foreign Affairs and International Trade.
It is a great privilege and honour to be here. I have been here before, as the chair mentioned. I am looking forward to a very useful exchange of views this morning. I would also like to take the opportunity to introduce my colleague, Deputy High Commissioner Narinder Chauhan.
As you mentioned, Madam Chair, I was here a year and a half ago, and I had made a fairly detailed presentation at that time, so I will restrict my remarks to just a few minutes. In fact, I have been asked to speak for about five minutes. I propose to give a very quick update on what we think has happened since I was last here and what we see happening in the next few months for the relationship.
As far as India is concerned, when I was here last, we were in the midst of the international global economic crisis and we were trying to find our way out of it. India also had been adversely affected by the recession — not as badly as some countries, but we were still impacted. For instance, our GDP growth for 2008 came down to 6.7 per cent as against 9.5 per cent in the earlier years.
However, the recovery process was reasonably good. In 2009, the economy grew by 7.5 per cent, and this year we hope to grow by 8.5 per cent. The IMF estimate is 9.7 per cent, but we would like to be more conservative. We estimate that the economy will grow by 8.5 per cent this year; next year we hope to be growing at 9 per cent plus.
One concern that I had the last time we met was about the frequency of exchanges of bilateral visits. I am happy to report that we now have had many exchanges. The situation has changed. Prime Minister Harper was in India in November last year, and we had Prime Minister Manmohan Singh in June of this year. This was the first bilateral visit by an Indian Prime Minister in 37 years, so that was an historic occasion.
At that time, we signed the landmark civil nuclear agreement, which I think is a major historic agreement between the two countries. During this period, we also concluded other arrangements. We signed MOUs on energy, mining, higher education and culture.
Also, it was my concern that we did not have too many high level visits from the Indian side. This year we have had as many as six ministers from India visiting Canada. In September alone, there were four ministers from India. This is quite unprecedented. We have never had four ministers in a single month from India.
I think it all goes to indicate the growth in the relationship. Of course, the Senate committee itself was in India. From what I hear, you had a very successful visit. I hope to hear more about it from honourable senators.
We also are expecting more important things to happen this month. The two prime ministers will meet again in Seoul later in November, and we have Minister Peter Van Loan visiting India in the middle of November. I think when the prime ministers meet, there is an expectation that we will launch the negotiations for the comprehensive economic partnership agreement.
Similarly, we have the social security agreement ready for signatures. We hope that agreement would be concluded very early.
On the trade side, there was a bit of a downturn in 2009; but I am happy to report that for the period January to August this year, trade has increased by 15 per cent over the same period last year. As you are aware, the two prime ministers have set a target of tripling trade over the next five years. It might seem to be an ambitious target but I think it is doable.
On some other areas, we have some very interesting things happening. On higher education, which I think is a very important area for cooperation, a delegation of university presidents will travel to India next week. It is the largest ever delegation to any country of university presidents, 15 or 16 of them. This mission has been organized by AUCC, the Association of Universities and Colleges of Canada.
My five minutes are up; I will stop there and continue with the discussion.
The Chair: High Commissioner, there certainly seems to be an appetite or willingness from both countries to increase the high level and other interchanges that should lead to something more than we have today in our bilateral policy.
Senator Segal: Welcome, Your Excellency. We appreciate you making time available, and also the presence of the Deputy High Commissioner.
I want to focus on an area outside the realm of trade, but very much important to our respective foreign policies — military cooperation on national security and on anti-terrorism. I would be interested in your perspective, given your long history of service to the Indian government abroad in different posts and in terms of your time here, as to whether the levels of cooperation are optimal, or whether we could be doing more on our side to facilitate more cooperation.
I know that the Indian government has taken a leadership position on both anti-terrorism intelligence, strategies and planning and contingency planning, and that there has been some sharing of those data sets. I would like your perspective on whether, in terms of working together, planning together, training together, what is going on now is sufficient and appropriate, whether it could be more robust, and whether in terms of our recommendations as a committee studying foreign policy for Canada, we should address those issues and make some recommendations that would advance the cause of greater cooperation in view of the fact that we share a long Commonwealth history. We share some of the same enemies in the sense of terrorists, and we share common values, your country being the largest democracy in the world.
Any advice you could give us would be very much appreciated.
Mr. Gavai: I will start by saying that there is awareness on both sides that we need to have greater cooperation in this area. We already have cooperation; we have a mechanism on the strategic issues, on counterterrorism, and we also exchange views from time to time. However, when the two prime ministers met, this was one of the issues that they discussed. The need to enhance cooperation in this area was emphasized.
While there is cooperation, I think much more can be done on the defence side, on the counterterrorism and on exchange of information on activities of terrorists. We certainly are prepared to engage in more intensive dialogue.
We were expecting the Chief of the Defence Staff for Canada to travel to India last year. Unfortunately, there was some Parliament business on the budget, et cetera, so the general had to postpone his visit. We hope that visit can take place soon because I think there is a lot of scope for cooperation in the defence area.
On the security side, again, I think we can do much more. I believe that your national security adviser will be visiting India soon to have discussions with her counterpart.
The visit of the national security adviser will bring more clarity on a number of issues. We have been victims of terrorism for a very long time, and you cannot say that if there is a problem of terrorism in one country it is not a problem for another country. I think that situation has changed over the years. We need more intensive interaction, more exchange of information, joint projects as well, and we would certainly be open to greater input.
Senator Segal: Your Excellency, in your judgment, were Canada to recommend or propose an exchange of officer cadets from our jurisdiction to study in yours, or college, and vice versa, if we were to suggest joint Indo-Canadian military exercises in the Pacific region because of concerns about the particular level of investment one of our other trading partners in the region have engaged in, which our Australian friends are quite concerned about, do you think that kind of proposition in principle would be assessed on its merits, or do you see any obstacles that would stand as a priori against that kind of proposal from our side?
Mr. Gavai: I see no obstacles at all. I think we would welcome such proposals. I believe you already have slots in the National Defence College for Canadian officers. We would certainly welcome any proposals for enhanced cooperation.
Senator Smith: This may be unfair, but I will ask anyway. We are all familiar with the phrase ``BRIC,'' Brazil, Russia, India and China. We chose to limit to three, but there is a kind of category of two that is more relevant — India and China. It is the billion-plus category. No other country is close to 500 million let alone being over 1 billion. In terms of differences, India's birth rate is a little higher in part because of the policy in China if you live in urban areas. Another difference is India has a longer tradition of free enterprise than China, although they are in high gear on free enterprise now. India has a much higher ability in English, in part because of the colonial period. English is the working language in business, and there are democratic principles as well.
China may have a little more emphasis on high tech stuff, but when you think of India and China, what differences do you think of? Do you think the two will become more or less similar as they are in this league of their own billion- plus category? In terms of China initially but India too, it is not a question of whether they will be the strongest economies in the world but when. When you think of the differences between India and China, what do you think of?
Mr. Gavai: China is very important for us because it is a neighbouring country. We have a long border with China and our relationship is ancient. It goes back literally hundreds and hundreds of years.
There are obvious differences. We have a completely different system. We are the largest democracy in the world. It is a parliamentary democracy like yours, whereas China has a different system.
On the economic side, China has had a lead over us and we recognize that. They are growing at a faster rate, but they started their economic reform process about 10 years before us. They have a 10-year lead over us.
We do not view these differences as hindrances in our cooperation because China has a different political system. That is something that is for them to figure out. However, we have a high level of cooperation in many areas. China is today our largest trading partner. It overtook the United States some time last year. We have a major stake in each other, India and China. There is a lot of talk about India versus China or India or China, but I think it is India and China.
We are certainly not in competition with China in the sense of trying to meet their growth rates because we know that democracy does enforce certain limitations, and we are quite happy to live with them because democracy is very important for us. That is in a sense a limitation, a limiting factor, but we have no problems with it.
Within the framework of democracy, we will do whatever we can to grow rapidly and meet the challenges that we face — eradication of poverty and eradication of illiteracy.
As I said, we want a cooperative relationship. There will inevitably be competition as we both look for resources, but we expect it to be healthy competition rather than confrontational.
I do not know if that answers your question.
Senator Smith: That is fair. Thank you.
[Translation]
Senator Fortin-Duplessis: Your Excellency, Madam Chauhan, I want to tell you how much I truly appreciated our travels in India. I very much appreciated the welcome we were given and the support we were given by all of the people we met. I wish to sincerely welcome you to our committee.
In my opinion, Canada must do more to sell its agricultural expertise in India, as agriculture is a sector which seems to be neglected in bilateral relations. Currently, Canada's agricultural and agri-food exports have reached $445 million a year, as compared to $3.1 billion in exports to China. I find this surprising to say the least.
What can we do to increase Canadian exports to India in this area?
[English]
Mr. Gavai: Quite rightly, agriculture or agri-business is an important area for our cooperation. Things are already happening here in terms of exports, as well as technology transfer. Canada exports almost 1 million tons of lentils every year from Saskatchewan. I had useful meetings in Saskatchewan just last week.
Apart from that, we also need to look at areas for food processing. When you visited India, you must have been told that as much as 35 to 40 per cent of our fruits and vegetables go to waste because we just do not have the link from the farmer to the market. We need to set up food-processing plants and cold storage. This is an area where there is a lot of expertise in Canada. Also, our minister for food processing visited Canada a couple of months ago and he had some useful discussions on this particular issue.
It is not just about exporting agricultural products to India, because India is also a major agricultural producer of food grains and fruits and vegetables, and India is by and large self-sufficient. More than just normal exports, I would say that participating in the agri-business sector in India, in the processing of food, in setting up infrastructure in the agricultural sector, and in agricultural research with the universities is where Canada can play an important role. This is the sense I get when I travel across Canada and visit universities and agricultural provinces like Saskatchewan. I get the sense that there is a lot of scope.
[Translation]
Senator Fortin-Duplessis: Thank you very much for your answer. I have another question, regarding a whole other area. During my trip, I noted that there were a lot of interesting opportunities in India for Canadian manufacturers of prefabricated homes.
What must that industry do in order to obtain technical accreditation in India for the factory-built, prefabricated housing made by Canadian businesses? Ideally that accreditation would make Canadian companies eligible to bid on calls for tender put out by big Indian builders and social housing projects.
[English]
Mr. Gavai: Housing is one of our main concerns. There is a major shortage of housing in India. I think prefab housing can provide a lot of answers. We are encouraging low-cost housing and foreign investment in the housing sector, and many companies are taking advantage of this opportunity. This is part of our infrastructure problem, infrastructure meaning not just housing but roads, ports and airports. Over the next 10 years, India will be investing $1.7 trillion into the infrastructure sector, and that would also cover housing.
Housing is mainly a private-sector activity in India. Of course, there are government institutions that develop low- cost housing for the underprivileged sectors of society, but housing is primarily a private-sector activity.
If Canadian companies are interested, and if there is interest on the India side also, they would certainly be partners. I do not think Canada should have any problems identifying partners on the Indian side. However, costs are a consideration. Obviously, you cannot have a house constructed in India at the same cost as in Canada. The costs would have to be substantially lower. The economics of prefab housing would have to be looked at. I am not an expert on prefab housing or, for that matter, on most things, but I think the structures will have to be manufactured in India, the technology will have to be taken to India. Therefore, to have an Indian partner would be important.
This area is being explored by other countries as well. If you look at the availability of new construction initiatives in India, the landscape has changed radically over the past few years. I am surprised by the kinds of things that are available in India in the construction business.
I would only say that the opportunity is there, and I think Canadian companies should look at this seriously.
[Translation]
Senator Fortin-Duplessis: You are right but first I would like to say that you should not sell yourself short, you most certainly must have great qualities since you have become India's High Commissioner to Canada.
I said that because I believe that Canadian prefabricated housing manufacturers could open plants in your country in order to build houses using Canadian technology, and not export prefabricated houses from Canada to your country. I was thinking rather of links with industries that could build them over there, but with Canadian technology. That is what I meant when I made that statement. I thank you most sincerely for your replies.
[English]
Mr. Gavai: I entirely agree. I think we are on the same wavelength there.
Senator Di Nino: Welcome to both our guests. Happy Diwali.
Your Excellency, one of the things I would like to add to your opening remarks is the great breakthrough in the past few months when the government decided to partner in the Vibrant Gujarat Summit that will take place this coming January. For the record, that is one of the largest investment and trade conferences in the world. It attracts literally tens of thousands of people from all over the world. I am delighted that Canada has decided to participate, because I think it will open up two-way opportunities as much as anything else we have done so far.
I would like to pick up on Senator Smith's comment about the differences between China and India. We heard testimony, and some of us privately heard further comments, that the Indian business community feels somewhat disadvantaged in dealing with a controlled economy versus an open economy with democratic systems. I think that is maybe a slightly bigger issue than we may have been led to believe, but I also agree with you that, in the long term, working within an open system will be much more beneficial.
I want to ask about two issues that you did not cover, both of which I think paint an incredibly positive picture of India that we should reflect on in our discussions and hopefully in our report. An incredible number of Indians are being lifted out of poverty. One of the witnesses used the example of how many more lentils we can sell to India just by doubling the number of mouths that will be available for that product of ours.
That leads me to the second point, namely, the middle class in India is estimated to be over half a billion people, which presents an incredible business opportunity for trade and investment by Canada.
Could you make some comments on both of those issues?
Mr. Gavai: About our business feeling threatened, yes, sometimes there is a feeling of resentment about Chinese goods. Our producers cannot match the price of Chinese exporters because they are, in a sense, not real prices. They are subsidized in some form or the other. We are now into our celebration of Diwali. There is an expression that is somewhat amusing while at the same time I think some of our people resent it. Our people worship idols when we have these festivals. They say that even the idols are now being manufactured in China and imported into India. That is, they are no longer Indian idols but Chinese who look like Indian idols. However, people are buying them because they are competitively priced and some of our manufacturers cannot beat those prices. You will also see a lot of decorations for Dilawi. Much like in Canada, they are made in China. Virtually everything these days is made in China. You are correct when you said that there is some resentment there.
On the poverty issue, yes, I spoke about it at greater length when I was here last year. We have come a long way, but we still have some way to go. We have still an unacceptably large number of people who are poor in India. As has been our experience since we opened up our economy, a high rate of inclusive groups has had a direct relationship with the decline in poverty levels. More people have come out of poverty in India since we deregulated. We have gone on a higher growth trajectory since the 1990s than in the 40 years preceding independence. There is a direct correlation.
We need to move ahead but it must be inclusive growth, as the prime minister keeps saying. The growth must be inclusive and the benefits of growth must go down to the people.
As far as the middle class is concerned and the 500 million figure, thank you for saying that it is such a large number. I would be more conservative there and say that perhaps 250 to 300 million are what one could classify as middle class. That is, those with the ability to buy consumer goods or what would be considered consumer luxuries in the Indian context. That is growing rapidly.
This might seem superficial, but another indicator is the number of mobile phones added in India every month. As you know, 15 million new mobile phone connections are made every month. That is an indicator of the growing middle class in India.
I do not know if that answers your question.
Senator Di Nino: That figure of 15 million speaks to the point that I was trying to make.
Senator Stollery: I have a couple of brief questions that arise from our recent visit to India, which was both fruitful and exhausting because we had to travel to different places. We visited three cities.
I had been in India previously, but I found two things to be of interest. A profound observation was made by one of our witnesses that about 60 per cent of the Indian population works in agriculture. In fact, that is low considering some developing countries where it can reach 80 per cent. Of that amount, 80 per cent vote in elections. They have a high turnout. That means they will have an enormous effect on government. Generally speaking, agriculture can be rather averse to change. It seemed to me that that would make it even more difficult to manage a growing economy that has been trying to change its structure and nature since 1991.
My family used to buy a lot of textiles in Madras in the 1950s. At one point during independence, there were 300 textile factories in Bombay; now there are none. The explanation was infrastructure problems and one thing or another. I am not sure that I bought that. I would like to hear your observations.
I completely agree that China and India are two different countries. I have heard the comparisons between them many times, but they are two completely different societies so it is silly. However, the fact that the voter base is very much agricultural must make it difficult.
We met with a group concerning the business of university exchanges and why there are not more Indian students, for example, studying in Canada. I am from around central Toronto, right near the University of Toronto. My family have lived there for five generations. I recall seeing more Indian students in the 1950s than I see now. We had a conversation about that. One of the Indian witnesses was representing one of our community colleges. The conversation was all about university-style exchanges. I wondered about tradesmen. We spend a lot of money in Ontario and in the other provinces on our community colleges like George Brown College. We have huge programs to train tradesmen for the economy because they are needed in order to build things. You can talk about housing, but you need people who know how to wire the house, put the plumbing in, and so on. There seemed to be a gap about that in our conversations.
Then we had the problem with the Olympic infrastructure. It would seem to me, as a person who is interested in those things, that the problem may have been affected by a shortage of tradesmen. Those are two questions upon which I would like to hear your thoughts.
Mr. Gavai: On the first question about agriculture, you are absolutely right. About 60 per cent of our population is engaged in agriculture, but agriculture contributes to only about 18 per cent of the gross domestic product, so there is obviously an imbalance. Growth in the agricultural sector is approximately 2 per cent to 2.5 per cent. We need to increase this to 4 or 4.5 per cent. The government is working on this.
A doctor who is well recognized as one of the founders of the green revolution in India is on the national advisory council, and one of the issues that engages him and others in India is how to take this growth from 2.5 per cent to 4.5 per cent so that agriculture contributes a larger amount to GDP, thereby improving the lives of the 60 per cent of people who are one way or the other dependent on agriculture. One of the answers to this, of course, is the question the honourable senator raised about agri-business and making improvement in that particular sector. If 35 to 40 per cent of fruits and vegetables go to waste, and 15 to 20 per cent of food grains in India are destroyed or go to waste for various reasons, that is a huge national waste. If we can plug these gaps, I believe it will benefit the person in the villages, the agricultural worker.
The chairman of Wal-Mart was in India recently, and he said that if India were to open up the retail sector, it would benefit agriculture and farmers enormously. These are suggestions we have to look at. We have been opening up at our own pace and carefully making sure that things do not get out of hand. We have to look at all the suggestions that are coming in. They are being taken on board, and we have to see how we can fix these things. Voter turnout in rural areas is high compared to cities, and in a democracy like India, it does put a huge responsibility on government to address problems in this particular area.
On higher education and education in general, yes, I fully agree with you that we need to also look at professional courses, training tradesmen or skilled workers. I think that is an area where there can be cooperation. There has been a great deal of focus on attracting more students or engaging in academic cooperation between universities, exchanging of scholars and faculty. Increasingly the issue of training technical people is becoming evident. India will need a lot of trained manpower in the coming years as it continues to grow. The Canadian experience would be invaluable. I entirely agree with you. We need to look more closely at the training of skilled and technical people.
Senator Johnson: I would like to ask you questions on the film and TV industry in India. It contributes an amazing $6.2 billion to your economy. A recent report found that the sector has a total gross output of $20.4 billion and contributes more to the GDP of India than the advertising industry. In terms of your culture and the work in this industry in India, which has one of the world's largest markets in terms of consumers and growth potential. They predict 11 per cent in the next five years. Can you give me information on how India will protect this industry in terms of copyright theft? Has there been legislation put forward to tackle copyright theft, such as camcord restrictions?
Mr. Gavai: In India, the film and TV industries are mainly privately driven. It is all Bollywood and Dollywood and ``woods'' all over. It is not just Mumbai. Mumbai produces just about one-third, and Bollywood produces less than one third of the films produced in India. The south is a major centre for film production. All told, India makes close to 1,000 films every year, which is of course many times larger than Hollywood.
Senator Johnson: It is larger than Hollywood, and it showcases you to the world in different respects.
Mr. Gavai: We have intellectual property regulations and copyrights in India. We have problems of piracy and that kind of thing, but I think we have far greater control than some other country. I will not name the other country, but you know what I mean. Nobody really mentions those kinds of problems in the Indian context, saying that piracy is a major issue. It is an issue, but we have mechanisms to enforce our piracy laws. That is not to say that piracy does not exist or that illegal copies are not made. It is there. I am not an expert on the subject. There are concerns, but it is not out of control.
Senator Johnson: It is growing really fast.
The Chair: I think we did get some information, Senator Johnson. I know you are new to the committee, and we have received some of that information. Perhaps we can pass that on, and the high commissioner may be able to provide something.
Mr. Gavai: I am aware that Indian pirated films are also available very quickly in Canada.
Senator Mahovlich: Twenty years from now the population of India may reach 1.5 billion. Is this a problem? Will this be a problem for India?
Mr. Gavai: Yes, it is.
Senator Mahovlich: Especially in terms of poverty.
Mr. Gavai: We are currently at 1.1 billion, and of course we have a very young population. That is an asset on the one hand, because we talk about the demographic dividend. A young population is an asset, and we have one of the youngest populations in the world, a productive population.
On the other hand, it is a challenge as well because we have to provide employment for all the young people, otherwise will there will be social unrest. It is a mixed picture.
We spoke earlier about the growth of the population in India, the higher population, but, again, it ultimately comes down to the system. We cannot enforce one-child norms in India; it is a democratic country. It must be done through education as the literacy rate grows.
I think the role of women is absolutely crucial here. If the girl child is educated you will find an overall impact of that on infant mortality, on education of children, on the growth of the population.
These are some of the issues. We do not deny that this is an issue, but it must be solved through education, through literacy, and certainly not through legislation of one child or no children at all. This has been tried earlier and it does not work. In India it does not work at all.
Senator Mahovlich: How do you rate India with China as far as poverty goes? I see the Gates Foundation is contributing $1 billion a year to India to fight poverty.
Mr. Gavai: Yes, the Gates Foundation is very active in India. In percentage terms, we have more people at poverty levels in India than in China. China has done better in that area, and we acknowledge that. We need to do more.
The Chair: As a postscript on that, we heard from one minister who said that your population will peak at some point and you have a food shortage, where we got into our discussion on lentils for a period of time, before it is anticipated to plateau and other dynamics will come forward. I think the estimate was between 2040 and 2050. That is given that all known factors continue and nothing else intervenes. It is an important and strategic issue for the Indian government and its officials.
As usual, you have added to our discussion and debate. I know you look forward to our report, and perhaps you will give us your sound advice again on whether we were on target. We thank you for being available and testifying at the absolute conclusion of our study.
Honourable senators, the report has been written, is in translation and should be available Wednesday or Thursday of next week. Our next meeting will be the following Wednesday, so you will have approximately one week to consider it. We will take a first look on the Wednesday of the week we return.
(The committee adjourned.)