Keynote AddressIndia’s Changing Innovation System

Introducing India’s minister of science and technology, Kapil Sibal, and John Marburger, director of the White House Office of Science and Technology Policy, Dr. Wessner expressed, on behalf of the National Academies, not only delight but also gratitude to the minister for making the trek from New Delhi to Washington and to the president’s science advisor for forsaking his heavy schedule to take part. He added that the scope and intensity of the U.S.–India relationship, so frequently mentioned during the morning’s discussion, was reflected in their joint presence on the dais.

INTRODUCTION

John Marburger

White House Office of Science & Technology Policy


Dr. Marburger, in his remarks introducing the minister, observed that Americans have learned that it is important to listen to India because important things are happening there. All are aware not only that President Bush’s visit to India earlier in 2006 marked a turning point in relations between the countries, but also that it has resulted in historic and widely publicized agreements. The present symposium, he said, is one of many activities that have taken place or been planned since then to realize the joint vision that President Bush and Prime Minister Singh put forward on that occasion. The nations’ long partnership has entered a truly remarkable time.

Their vision, spelled out in the communiqué that capped the meeting of the two heads of state, encompasses five themes that are strongly linked to and deeply



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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium Keynote AddressIndia’s Changing Innovation System Introducing India’s minister of science and technology, Kapil Sibal, and John Marburger, director of the White House Office of Science and Technology Policy, Dr. Wessner expressed, on behalf of the National Academies, not only delight but also gratitude to the minister for making the trek from New Delhi to Washington and to the president’s science advisor for forsaking his heavy schedule to take part. He added that the scope and intensity of the U.S.–India relationship, so frequently mentioned during the morning’s discussion, was reflected in their joint presence on the dais. INTRODUCTION John Marburger White House Office of Science & Technology Policy Dr. Marburger, in his remarks introducing the minister, observed that Americans have learned that it is important to listen to India because important things are happening there. All are aware not only that President Bush’s visit to India earlier in 2006 marked a turning point in relations between the countries, but also that it has resulted in historic and widely publicized agreements. The present symposium, he said, is one of many activities that have taken place or been planned since then to realize the joint vision that President Bush and Prime Minister Singh put forward on that occasion. The nations’ long partnership has entered a truly remarkable time. Their vision, spelled out in the communiqué that capped the meeting of the two heads of state, encompasses five themes that are strongly linked to and deeply

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium dependent upon the technical capabilities of their countries: economic prosperity and trade, energy security and a clean environment, innovation and the knowledge economy, global safety and security, and deepening democracy and meeting international challenges. While these themes could be said to summarize the challenges and aspirations of all nations participating in the globalized economy of the 21st century, they hold a special significance in the case of each. The nature of the U.S. relationship with every country depends on the unique characteristics of that country, its capabilities, its position in time and space, and the challenges it faces—factors that also shaped the U.S. response to the partnership. It was this uniqueness, Dr. Marburger explained, that is behind the necessity of his hearing what Minister Sibal had to say. Scholars speak of two distinct ways of understanding human affairs: the “diachronic” or historical approach, which traces the origins of a situation, and the “synchronic” or snapshot approach, which seeks the structure inherent in a pattern of events at a given moment. During his remarks at dinner the previous evening, Minister Sibal had suggested that the historical approach did not suffice to describe or explain what was currently happening in India, particularly in regard to its relationships with other countries. He had urged his audience to look instead at the geography of international developments, as well as at the distribution of economic activity and its technical basis in space rather than in time. Change was occurring too rapidly, he had inferred, for guidance based on history alone to be reliable. Dr. Marburger strongly identified with this point of view. Americans would not be able to see the course of their future relationship with India clearly by examining the trajectory of past interactions. The present differed too radically from anything known before, and direct, real-time interaction among parties was required. Just such an opportunity was being provided by the day’s symposium, and he thanked his Indian colleagues for taking the time to bring word of the extraordinary developments afoot in their part of a new global economic geography that they had done so much to create. The symposium was also providing an opportunity, at an important moment in time, to get a synchronic snapshot and to ponder the patterns that it revealed. Scientists tend to equate innovation with new ways of looking at their fields or with new tools—new instrumentation—for broadening the opportunity for discovery. In business, innovation more often means introducing new ways to solve a problem, satisfy the needs of a market, or deliver a product more efficiently. Explaining the difference, Dr. Marburger said that scientists try to map out the structure and properties of nature, whose laws are relatively constant. “It’s not that nature stands still for us,” he said, “but at least it doesn’t change its face, particularly from day to day.” Once made, therefore, innovations in science can last for a long time. In contrast, rather than mapping out an unchanging nature, economic activity involves grappling with a continually changing social reality whose varying circumstances require constant attention. Innovations are not

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium “once and for all,” but transient, serving for a brief time and then losing their potency or their market. For this reason among others, according to Dr. Marburger, innovation was not a zero-sum game, and the United States had no need to fear that it would lose anything by working with other countries to develop their innovative capacity. The geography of the global economy was such that different innovations were required for the unique conditions of each separate region—something that, while true even within a given country, was especially true among countries. “We should be particularly eager to work with India, which is the world’s largest democracy and increasingly important to our own innovation economy, to magnify our mutual capacity to address our respective problems,” he said. Focusing specifically on the man he was introducing, Dr. Marburger said he had been struck, during their brief interactions of the previous year, by the combination of talents that Kapil Sibal had brought to the position of minister of science and technology. “At every international conference I go to, I see his face and hear his booming voice, and I usually hear something that I didn’t expect to hear—some insight that greatly impressed me,” he said, adding: “It doesn’t take too many Sibals to make a dynamic country.” First elected to Parliament in 1998, Kapil Sibal served as the official spokesperson of his party, the Indian National Congress, during the 1999 and 2004 parliamentary elections. A former cochairman of the Indo–U.S. Parliamentary Forum, he assumed the post of minister of science, technology, and ocean development in January 2006. “Candid and forthright in his political views, Sibal has often publicly criticized the Congress Party for some of its policies,” said Dr. Marburger, quoting material provided by the Indian Embassy. The president’s science advisor then offered a comment of his own: “That’s brave. It’s impressive. It tells us something about India, and it gives us pause in this country regarding our own systems.” Born in 1948, Minister Sibal is well known in India for pleading cases before its Supreme Court. He came to the limelight in 1993, when in the capacity of attorney he addressed Parliament’s Lower House, the Lok Sabha, for three consecutive days during the historic impeachment of a sitting justice of the Supreme Court, the first such proceeding against a member of India’s superior judiciary. He holds a Master of Arts degree from St. Stephen’s College of Delhi University and a Master of Laws degree from Harvard Law School. He joined the bar in 1972, has served as additional solicitor general of India, and was thrice elected president of India’s Supreme Court Bar Association. In 1991, he led the Indian delegation to the United Nations Commission on Human Rights (UNHCR) in Geneva, and he has been a member of the UNHCR Working Group on Arbitrary Detention. “It’s very impressive that India has chosen a prominent attorney who has an interest in human rights to be its science minister,” Dr. Marburger reflected, adding: “Not that I don’t have an interest in human rights myself, but it’s an unusual thing and it speaks to the unique qualities that Minister Sibal brings

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium to his work.” Currently, he was serving on the Governing Body of St. Stephen’s College and on the Board of Management of the Indira Gandhi National Open University, both located in New Delhi. Ceding the floor to Minister Sibal, Dr. Marburger said that he would look forward to hearing the minister’s words of wisdom on what he hoped would be his frequent visits to the United States, just as all present were looking forward to hearing him speak at that moment. INDIA’S CHANGING INNOVATION SYSTEM Kapil Sibal Ministry of Science and Technology Minister Sibal began his remarks by thanking Dr. Marburger for the introduction and promising not to let him down by failing to say something that he had never heard before. He explained that his preference, expressed the previous evening, for the geography of science over the history of science stemmed from the conviction that we at the dawn of the 21st century are no more able to imagine the changes that will take place in the coming hundred years than observers of a century ago were able to envision life as it is now. The challenges of the past century were far different from the challenges that our civilizations are to face in the one just begun. The 20th century was a century of conflict: Empires created in the 19th century were on their way to being dismantled before its close, but it was in the 20th century that the dismantlement had been completed. The driving force in both building and dismantling empires, Minister Sibal declared, had been technology. In the march of civilization through the 20th century, force and velocity were at the heart of technological development. “Force and velocity became, in a sense, policy determinants,” he said. “Force and velocity were the reason for change.” In the 21st century, however, all would be different. “Force will have no role to play; markets will.” In an ever-expanding global economy, the challenges would relate to the availability of water or energy, to the environment, to disease, to hunger, to poverty, and to natural disasters, with many others on the list as well. Referring to the title of his talk, the minister posited that a prerequisite to understanding India’s changing innovation system was an understanding of America’s changing investment needs, as the two went hand in hand. Why were Western countries, among them the United States, looking for markets? Because today’s consumer wants the highest quality product at the lowest possible price. Meanwhile, the value of physical assets owned by multinationals have been on the decline over the previous 20–25 years, but the value of their nontangible assets—their intellectual property—has been increasing. These facts are at the heart

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium of contemporary technological development, which is driving economic growth everywhere in the world. At the same time that the world’s multinationals are looking for access to larger markets, the world trade regime (represented by the World Trade Organization) allows countries to lower their tax and tariff barriers in order to provide that access. Countries such as India and China have, therefore, been able to play a very significant role in the changing investment scenario. The challenge before them was to collaborate with the West—this is imperative—while at the same time creating intellectual property of their own through innovation. “And innovation is not about technology alone,” Minister Sibal stated. “Innovation is about the use of ideas and the use of knowledge in its application for change. And when that happens, then it’s a win-win.” Minister Sibal noted that conference participants could at the moment be feeling either “euphoric” or “exceptionally pessimistic” about India, since they might have drawn either of two opposite conclusions from the morning’s presentations: that the country was on the fast track or that it faced formidable obstacles to progress. However, this could be the case regarding any of the world’s nations, depending on one’s point of view. With a middle class that, at 300 million, might be larger than that of any other country, India has not done too badly. Nor should one forget that the United State had more than 200 years of history behind it when considering where technology has taken that nation, the institutions it has built, or the systems it has put into place. America’s history was not to be compared with that of India, where liberalization started in 1991 and which has had just 15 years to master developmental processes and reach levels of excellence that countries such as the United States have taken 200 years to build up. Alluding to concerns about pollution levels in Delhi, Bangalore, and other parts of India and about infrastructure development, Minister Sibal declared: “Nothing can happen overnight.” He recalled hearing as a young student about the levels of pollution in Chicago, New Jersey, and many other places in the United States, and he remarked that the country had dealt with such problems through building institutions, through innovation, and through applying technologies for change. “The expectation that this must happen in India tomorrow,” he protested, “is a little unfair”—even if one wished, as did he, that “it had happened yesterday.” India, perched on the cusp of great opportunities, wished to collaborate with the United States so that the country could show Americans all it had to offer them while at the same time meeting its own challenges. The minister equated solving India’s problems to solving the problems of the world, adding: “That’s what India is all about.” The country has a six-lane highway over which traffic moves with great speed, but it also has bumpy, single-lane roads. Its challenge was to turn the latter into the former.

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium Expressing pleasure at the prospect, discussed earlier in the day, of India’s receiving help with environmental and energy needs through partnering with the United States in such programs as FutureGen, the minister reiterated India’s desire to help U.S. businesses with access to markets. “India wants to march along in the comity of nations as an equal partner, and India would like to collaborate with countries as an equal partner,” he stated. “This is verily the win-win situation that we must talk about.” To illustrate the exciting changes currently taking place in India, Minister Sibal turned to health care. Unlike in the United States, 80 percent of India’s health sector is controlled by private industry. Visitors to India are finding some of the finest hospitals and health care, which are available to all those able to pay, and a great deal of health tourism is taking place: Foreigners come for care because India offers lower costs and high-quality health care in superb hospitals. At the same time, entire segments of the Indian population have no access at all to health care. It was not advanced technology that can solve the problem of access to health care in India, according to the minister; instead, solutions are needed that, while technologically based, are accessible and affordable. A partnership recently undertaken with a private urban hospital delineates the kind of change the Planning Commission is seeking. Minister Sibal has proposed that the hospital care for a cluster of villages and suggested that it set up a “medical kiosk” to serve their population, since poor people could not be expected to travel to Delhi for treatment at its facilities. “‘Let the rural folk come to that little medical kiosk,’” he recalled telling hospital officials, “‘and, through remote satellite technologies’—which we have in India—‘let them be diagnosed by people sitting in the urban centers.’” The Ministry of Technology is covering the necessary investment in medical hardware; the hospital is making available the doctors. Although technology-based, this solution to the problem of medical care in rural areas was “not high-tech,” and it could be implemented at low cost. Similarly, it was thanks to what Minister Sibal called “very simple technology” that clean water is being made available to some populations for the first time. Many of the 400 million who live along India’s coasts have no reliable access to drinking water. He was soon to inaugurate a thermal desalination plant in Chennai whose technology would exploit the difference between the temperatures of water at the ocean’s surface and at a depth of 200 meters by using surface water for flash evaporation and deep water for condensation. The minister’s message for the rest of the world, and specifically for the people of the United States, was that collaboration is required at both ends of the technology spectrum. India needs to collaborate with the United States in bringing high-level technologies to bear on the larger problems of the world: in the context of energy, for example, atomic power generation, photovoltaics, hydrogen cells, or next-generation, zero-based coal technologies. However, India also is in need of very simple technologies to improve the lives of 600 million of its people, 500 million of whom are living on less than $2 per day. Such technologies are

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium crucial because, as he put it, “the object of technology development is ultimately economic growth and raising the living standard of all, not just a few.” The world at large also has a stake in the success of these endeavors, stressed Minister Sibal, and it is related to the United States’ changing investment needs. About 90 percent of India’s economy is already free, and the prime minister has promised publicly that tariffs would continue to be lowered until they reach levels of the Association of Southeast Asian Nations, which would improve access. India represents a huge market, and if it is able to improve the lot of the common man and to put more money into the hands of India’s rural folk, they would have a larger capacity to buy consumer goods. At present, 60 percent of India’s population—more than 600 million people—live in rural areas. India leads the world in the production of milk, sugar, and tea; it is the world’s second-largest producer of wheat and rice, and the second-largest agricultural producer overall. Yet India’s per capita per acre productivity lags far behind those of the leaders. Of Indians making their living from agriculture, 60 percent are marginal farmers without the wherewithal to invest in the land. A large part of the agricultural sector lacks any access to technology. Incumbent upon the country, therefore, is to improve its best practices. This includes ensuring that farmers get good seeds, and that they apply multicropping patterns. Farmers also need clear and reliable market access, and this calls for getting rid of commission agents, and making available a cold chain from the field to the market. By using best practices and simple technologies to raise productivity levels, India could become by far the world’s largest producer, and a major exporter, of agricultural commodities. And if it invests in agro-based industries, a conspicuous strength of the United States, it would be able to sell value-added products to the rest of the world and bring about economic growth. With some of India’s economic sectors already doing well, Minister Sibal noted, questions have arisen as to why employment opportunities remain inadequate. “Employment opportunities do not come by education alone,” was his answer. “Employment opportunities come through growth.” Why are there employment opportunities in the IT sector? Because growth in the IT sector, which has evolved into a $20 billion to $30 billion industry, has spurred enrollment in IT programs at the country’s educational institutions. Why do employment opportunities exist in the biotechnology sector? Because that sector’s annual turnover has reached $1.5 billion. Why is there growth in the pharmaceutical sector? Because it has become a $20 billion industry. Minister Sibal expressed his hope that India’s pharmaceutical companies, already important producers of generic and bulk drugs, would capture 90 percent of the U.S. market for the latter in the years ahead. However, India’s pharmaceutical industry is doing much more than exporting bulk drugs. It is innovating, producing its own products and lead molecules; it is acquiring patents; and it is acquiring companies all over the world, a subject that Swati Piramal of Nicholas Piramal India Limited would address later in the program.

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium While acknowledging that, as some had remarked, Indian levels of investment in R&D are low, he stated that they would always be low unless there is economic growth. Why was it that the level of R&D investment in India’s pharmaceutical sector has grown to almost 6 percent and that its 20 top companies are investing more than 6 percent, or that some of its companies were investing as much as 20–24 percent of sales in R&D? It is because that sector is doing well. Similarly, why is India’s automobile component industry doing well? Because there is economic growth. “Investments come through economic growth,” the minister stated. “Once there is economic growth, there will be more investment in R&D.” Emphasizing that India has to continue with its process of economic liberalization in order to provide opportunities for investment, Minister Sibal asserted that a partnership between India and the United States is “vital” for the economic growth of both nations, whose combined population was greater than that of China. “Just imagine the market that we can have access to!” he said. “And not just the market of people in India and the United States of America, the world market.” Putting forward areas for collaboration, he noted that India is a leader in space technology and satellite communications systems, having its own capabilities in missile technology. A U.S.–Indian partnership in those areas would ensure world leadership. India has also become a leader in vaccine development, providing 90 percent of the world’s measles vaccine and selling hepatitis B vaccine, which at one time cost more than 900 rupees per dose to import, at only 16 rupees per dose. For Americans, the challenge is to recognize that India as a nation faces challenges and that the United States as a nation can realize opportunities from those challenges. “That is a partnership that matters,” the minister stated, urging: “Let’s meet the challenges. Let’s create the opportunities.” Attributing to Napoleon the statement “Science is the god of war,” he offered an alternative: “Let science be the god of peace and of prosperity.” DISCUSSION At the conclusion of Minister Sibal’s speech, Dr. Marburger suggested that they entertain questions from the audience, a proposal to which the minister agreed. Anita Goel of Nanobiosym said that while both speakers had been quite eloquent regarding the need to work together on a model for innovation, it was not clear what specific roadmap would enable India and the United States actually to join hands in building it. What role, she asked, did each see for government, for academia, and for private firms? What would be the interplay among them? Did the speakers envision something like a self-assembly model, in which the government would create only an environment and the system would self-organize? Or did they see government taking a more proactive role in creating these collaborations?

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium Dr. Marburger answered that the first step had been taken by Prime Minister Singh and President Bush in focusing attention on not only the need but also the opportunities for partnership between their two countries, and in raising its level of priority within government. Just the previous fall, he had joined Minister Sibal and Secretary of State Rice in signing a Science and Technology Agreement that set out a framework identifying broad areas for collaboration. The next step would be to identify agencies whose programs fit into that framework and specific mechanisms that would allow the governments to invest in partnership programs that could bring value to both sides. While government expenditures by themselves would not have the greatest impact, they could lower barriers and pave the way for other, larger ventures. With economic activity already at a very high level, the questions have become which components afford the highest leverage and what obstacles remain to even further development in the future. Minister Sibal added that, in his view, effort is needed at three levels. Number one is at the government-to-government level. Here, the two countries already have in place such great enterprises as the Bi-national Science and Technology Endowment Fund, Initiative on Agriculture, and High-Technology Cooperation Group. However, it is necessary to move beyond that to a second level of collaboration, and that this is in progress as well. The minister said that he has visited a large number of U.S. universities, and each desired to arrange to do collaborative work in niche areas of expertise with institutions in India’s university system, among its autonomous research institutes, or both. Such agreements already exist: The University of California had joined with Indian research institutes in an undertaking requiring a $10 million annual investment. The third level at which India needs to move forward is to make sure such investment and collaboration are taking place in a friendly environment so that more people and institutions would be attracted to India. A product patent regime has already been put into place for the pharmaceutical sector. In the Parliament’s winter session, legislation along the lines of the American Bayh–Dole Act would be introduced with the goal of guaranteeing to the scientific community working in Indian educational institutions ownership of intellectual property that it created. In addition, India is establishing special economic zones where huge excise and tax benefits are to be given and is also setting up biotechnology parks. A biotech development strategy being implemented allows government funding of start-up companies. “We are going to public–private partnerships in a big way, giving money to small and medium-scale enterprises in the biotech and other sectors to make sure they do new kinds of research for new products,” the minister stated, inviting the audience to “come to India and see what’s happening.” Som Karamchetty of SomeTechnologies introduced himself as a product of globalization: Originally an Indian citizen, he subsequently became an Australian citizen and was now an American citizen. He recommended that India “translate” technology it might see or acquire from abroad rather than applying it without

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium thought to its appropriateness or simply copying it. “Please do not develop roads like those in America,” he urged, characterizing the Capital Beltway ringing Washington, D.C., as a six-lane “parking lot.” He pointed to contrasts in telecommunications infrastructure and distribution of drinking water that also differed in the U.S. and Indian contexts and might affect development strategies. In light of such differences, he asked, who would distinguish between technologies that could simply be taken over and those that might need to be modified or substituted, and how would this be done? Dr. Marburger said that the needs of the United States and the needs of India, while they might be distinct, did in some respects overlap and reinforce each other. India could help the United States to add value to its products and, by doing so, enrich itself so that it was able to invest in upgrading its own infrastructure and broadening its markets. Minister Sibal, concurring with Dr. Marburger, stated that collaborative activity in India has a twofold structure. At one level, the 300 or so Fortune 500 companies investing in R&D in India are using Indian talent—80,000 engineers and scientists—for the creation of intellectual property targeted at their home markets. At the other level, investments in the United States are underwriting the quest for the kinds of affordable, accessible technology solutions required in India. Both would, and should, continue to happen. Hiten Ghosh of Hughes Network Systems introduced himself as a representative of the 40,000 IIT alumni who had become U.S. citizens. Just as there were opportunities for the United States in India, he said, the two nations have many common problems, so that solutions that might be arrived at through collaboration could benefit both. The application of technological best practices that had helped fishermen in India, for example, might also be of benefit in the Rust Belt and in some U.S. rural areas. While there might be a difference of scale, some elements of the retraining problem that both countries face are constant. Addressing both speakers, he asked how connectivity and collaboration could be used to address common problems. Minister Sibal said that the areas of collaboration on global issues that he set out for two countries—water, energy, environment, disease, and natural disasters—would have ramifications worldwide. India and the United States both have the human resources and the technology to deal with those issues even if their skill sets are different. The United States might work on hydrogen cells, India on photovoltaics, he said, picking an example from the “multifarious” energy sector but stressing that it could be extended to all others. Under collaboration of the sort needed, the two countries could pool their resources but work in different areas in order to provide solutions that could be applied anywhere in the global marketplace. Dr. Marburger cited as common issues energy, environment, some areas of public health, and water management, although he added that the dimensions might be slightly different in each of the countries. The prodigious intellectual

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India's Changing Innovation System: Achievements, Challenges, and Opportunities for Cooperation: Report of a Symposium talent that India has sent to the United States is helping in the quest for solutions to these problems. The education being brought from the IITs is value added to the U.S. economy and culture, and it is highly valued in turn. Dr. Telang of Howard University noted that Minister Sibal’s presentation sent a very powerful message and at the same time issued a challenge. The quote from Napoleon with which the minster had concluded his keynote address made clear the potential of science and enterprise. Alluding to the presentation of Mr. Subramanian in the previous panel, who had declared that much of the policy and implementation responsibilities relating to innovation lie with India’s state governments, he inquired if there is sufficient dialogue between the central government and the state governments. “There is no dialogue between me and Mr. Subramanian, I can confess to that,” the minister quipped. Then, saying he considered the issue a federal one, he added that India’s central government is in fact collaborating with the states through contact with state chief ministers and through conferences—and even if the U.S. federal structure is far stronger than India’s, Indian states do not disregard federal objectives. While acknowledging that the federal government might not have laid sufficient emphasis on some of the challenges that Mr. Subramanian talked about, Minister Sibal contended that the picture was not as dark was made out to be. Bringing this session to a close, Dr. Wessner expressed his appreciation to Dr. Marburger and Minister Sibal. Calling the minister’s list of the new initiatives “impressive,” he reminded the audience that the conference represents an opportunity for mutual learning. Both countries, he noted, face new global challenges and see the need for policy change as well as collaboration to adapt to this new competitive environment.