The sheer size of Nasscom is one indicator of the success of an industry that India has made its own. The question now is whether Asia’s second largest country can achieve a similar transformation.

In 1820, Asia accounted for 56 per cent of world GDP, with India’s contribution standing at 16 per cent. So perhaps we should see the rise of India more as a return to its former success.

Strengthening the rule of law, building a social security system, dealing with corruption, the supply of energy, establishing standards of corporate governance, the strengthening of the financial system and tackling inequality. All these are significant challenges. But looking back on what has been achieved to date, I’m optimistic for the future.

Indeed, in my view no investor can afford to ignore the potential of India. India is already the world’s fourth largest economy on a purchasing power parity basis. It is also one of the top three Asian countries in its GDP growth rate – which, at around 6 per cent in 2004, is far higher than an industrialized economy could hope to achieve.

Economic growth has meant that India’s real GDP per head more than doubled between 1980 and 2000, thanks largely to two revolutions. The green revolution, which transformed agricultural productivity and employs more than half of India’s populace. And the second revolution: liberalization.

On top of this, India has a number of the attributes that are commonly associated with successful economies. Sound government – I need to remind no one here that India is the world’s largest democracy has; a free press; has the rule of law and posseses property rights.

India has an excellent tertiary education system, producing a large pool of qualified professionals. India has over 24 million university-educated people, an increase of 60 per cent in just over a decade. To put this in context, this is the same size as the entire population of Malaysia. India has over a thousand engineering colleges where the medium of instruction is English, and some 350,000 students are enrolled each year. In addition to this, there is a very large pool of English-speakers.

The combination of an educated, English-speaking workforce, available at a lower cost add up to a compelling competitive advantage.

And they have been the major driving force behind the recent surge in the business process outsourcing and IT services industries. Today, it is estimated that over half of the Fortune 500 companies outsource some of their IT-related work to India. The number of people employed by the IT and related sectors has increased nearly three-fold from 1999-2000 to over 800,000 today.

The IT services industry has been an outstanding success for India, of that there is no doubt. But even on the most optimistic forecasts, the industry is expected to employ only around 4 million people. In a country with a working population of 400 million, with 10 million new workers joining the workforce each year, it is equally clear that IT services cannot provide all of India’s future growth.

FDI is increasing. Last year, India attracted over US$3 billion in FDI. Kearney’s latest FDI Confidence Index ranked India as the third most attractive FDI destination in the world, behind China and the US. Two years ago, it was only ranked 15th.

The infrastructure required to support manufacturing is improving, thanks to continued investment. As you know, the Golden Quadrilateral road project connecting India’s four main metropolitan areas is about three-quarters complete, and the 7,000 km North-South East-West corridor project is due to be completed in 2007.

Another cause for optimism about India’s long-term prospects is simple demographics. As most of you know, half of India’s population is under the age of 25. India’s population will continue to grow in the next 50 years, and the proportion of working age people will also increase for at least the next two decades.

Finding employment for new generations of workers is a challenge, but it is also an opportunity that may allow India to outperform developed and developing countries alike.

Overall, it is clear that reforms and liberalisation are creating an environment in which the talents and ingenuity of India’s growing number of world-class companies can thrive.