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Kamal Nath: We have our coalitions, we have our groupings, and yes, the U.S. is looking at India to convince other countries to .. counsel other countries.. to persuade other countries to look at many dimensions which they may not be looking at. We do try and do that, so that we are able to move forward in world trade talks.

DG: I think more specifically the US would like to see India lead the developing world to better trade openness.. Do you think that that's important? Do you agree with the US argument that better trade openness will help India deal with inflation and shortages.. and bring more goods into your country?

KN: Trade openness must be accompanied by trade fairness. If on one hand you have heavy subsidies on agricultural products, then it's not open trade. You're not talking about trade flows, you're talking about subsidy flows. So it's very important that trade be fair. On the other hand there is a lot of force and validity when trade is free, trade is open.. It leads to better products, it leads to good prices for the consumers. But we must ensure that trade will move freely.. move fairly. We must ensure that trade flows are not.. do not have massive subsidies in them, for anybody.. for any country, it's not particularly the United States. It will be for the European Union, for Canada, for Australia .. whosoever it is.

DG: You're talking specifically about agricultural products. Many of our most competitive agricultural products aren't subsidized at all. Apples aren't subsidized. Oranges aren't subsidized.. Do you have a problem with those trade flows?

KN: Well there are 75 billion dollars of subsidies.. U.S.. agricultural subsidies.. There are two types of subsidies, one of which is directly trade distorting.. and those which are not trade distorting but they are subsidized. So there are U.S. products... processed foods... which are very competitive.. Obviously, those trade flows... as long as they don't create problems on subsistence... people who earn less than one dollar a day.. who are subsisting on the one acre, one half acre farm.. as long as they are not dislocated, then we have no problem.

DG: Now I hope you won't mind if I tell you that right before I came here a U.S. business leader told me a joke. He said India thinks that the Doha Development Round (DDA) stands for "don't do anything".. Is that.. maybe it's little sharp but is it a fair summary of India's view on trade?

KN: I heard that before. It's not "don't do anything",. I think the talks are very transparent.. and we're waiting, and the world is waiting for the United States to say that we are not going to subsidize. But the United States cannot say that. You heard it right now. I heard it 45 minutes ago from the USTR.. right here in Delhi. So we understand that that's a sensitivity in the United States. But when those subsidies are sought to be used for trade, that's when the problem comes. There are agricultural exports from the United States that may not have subsidies.. I don't think those are the issues. The issues are the very large mass of subsidy, because then the Indian farmer is not competing with the U.S. farmer. He's competing with the U.S. Treasury.

DG: You're talking about cotton? Which crops are you talking about?

KN: Cotton.. sugar.. wheat... rice. All these. These are figures on the net. They're not my figures. I'm going by U.S. figures which they have put on the net themselves on how much subsidy they give to every crop... to every product. I'm going by those figures. I'm going by those figures which are released to the Congress.

DG: Let me broaden the discussion out.. Since we've been here we've seen a great enthusiasm for the Indian economy.. You might even call it euphoria... I'm wondering if it's euphoria or maybe a little bit of irrational exuberance? A little bit of an overheating in the Indian economy? Which is it right now?

KN: The fundamentals of growth are right. We have a 9 percent growth rate taking place. We have the manufacturing sector growing .. our trade is growing.. so we are moving in the right direction. We have a strong demographic strength.. a young country so there are a lot of hopes. Of course, there sometimes is an element of exuberance and why not when things are moving?

DG: But is the real estate market moving too fast? Property prices have doubled, more than doubled in some cities... There's inflation.. I'm wondering if India's getting a little ahead of itself right now?

KN: You're right.. Property prices have zoomed up. But there are some natural fallouts when you have 9 percent growth. There's bound to be some inflation.. Of course our inflation is beyond 3 1/2 percent, 4 percent. Just about touching 4 percent may be all right. But we've gone beyond 6, so it's a matter of great concern to us. That's there, and of course at times there are some artificial bubbles but again, you talk of massive things.. It's very very little.

DG: There's a natural comparison that people make between China, a country of over a billion people, and India.. a country of over a billion people.. Some people want to compare the two economies.. the potential in the two economies. Do you see comparisons there? How do you see India comparing to China and its potential?

KN: Well, China has its own genius, we have our own genius. China's growth is export market driven. Or growth is domestic market driven. So there are two different models, really you can't compare them. We are a market economy. We are a democracy. China is not. So they are two different models altogether and I never make these comparisons. I never say it's India versus China.. It's India AND China.

DG: The Indian model of development seems to be that India can move forward with high end services.. Infosys, Wipro, things like that. But I'm wondering, will that provide enough job growth for the many, many people who live off the land or live in slums around Delhi and other big cities?

KN: Well it's in raw services. We are now emerging as a major manufacturing country. We have 12 percent growth in manufacturing.. Huge manufacturing plants are coming up. We have huge investments in manufacturing. So the story of services or IT, while that's true, that's one part of it. The other story.. over the last 3 years.. that story is manufacturing, where you'll find the biggest names putting up manufacturing facilities here. Of course, China has experience in mass production.. For us it's production which has high technology in it.

DG: A question I have not heard before until I started looking into India. I hear debate about whether there should be reservations in the private sector to help people who are lower caste. Is that a good idea or a bad idea?

KN: Well we are grappling with that. There has to be social justice as much as there's going to be growth, and if the private sector does not address this issue themselves, that people who are from sections of society which are not feeling benefits of growth.. are not as involved.. then government has to step in. So we are now grappling with this to see how growth can be all-inclusive.. to all sections of all society...