Prime Minister of India - Dr. Manmohan Singh

PM's remarks at the meeting of the Council on Trade and Industry

As you would all agree, we are meeting today under difficult circumstances. The external environment poses significant challenges. We face the continued possibility of a potentially severe crisis in the Eurozone. The US growth has continued to be sluggish. In the near future we cannot hope to see the same growth impulses from the West as we saw prior to the meltdown. Coupled with this are issues of international food price volatility and the increase in oil prices.

The situation on the domestic front is equally a matter of concern. The persistent high inflation for some time now is unacceptable. We have to steer the economy back to the path of fiscal consolidation.

While purchasing power has gone up, the supply side response has so far been muted. We believe that with the policy focus on improving agricultural production and productivity, our economy will soon be able to step up the production of food articles, thereby controlling inflation in these products.

This is the broad context in which the RBI has had to use monetary policy in an attempt to bring down inflation. I am aware that many of you have concerns that the high interest rate regime is affecting your investment plans. In order to curb inflationary pressures some reduction in aggregate demand was essential. We have seen some easing of inflation in the last few weeks and if this is sustained, I expect that the RBI will be able to ease up on monetary tightening as well.

The sharp depreciation of the rupee is also a matter of concern. We are watching the situation very closely and will take whatever steps are necessary to prevent wild fluctuations.

However, the exchange rate depreciation increases the profitability of exports and our industry should take advantage of this development.

Many of you have raised, from time to time, concerns with regard to domestic policy. would request you to appreciate that almost every major government decision has to be negotiated in the larger democratic arena. This is especially true of sensitive issues like those related to acquisition of land and environmental concerns. On issues such as these, industry and the government will have to work together to find solutions that are fair and equitable even as they promote growth.

The members of the Council of Trade and Industry represent the leaders of private enterprise in our country today. As leaders of business not only in India but globally, the Government expects you to set the highest standards of corporate governance and social action, to be emulated by other private and public businesses.

Let me take this opportunity to reaffirm that our government is committed to create a growth oriented economic environment. However, in a democratic polity like ours and in the era of coalition politics, it often becomes necessary for the government to build a broad consensus on major public policy issues. This may sometimes take longer than what we would like. But our direction and objectives are clear. During the 7 years of UPA government, our country has remained on the path of liberalization even as we have sought to provide social safety nets for the poor and underprivileged. I believe that these policy measures have also benefitted industry and that our policies of pro-poor growth, skill development and agricultural rejuvenation will help industry to grow at a faster pace.

In this context, I must confess that it is a little disappointing to sometimes hear negative comments emanating from our business leadership or be told that government's policies are causing slowdown and pessimism In the industrial sector. Such comments have added to uncertainty and have emboldened those who have no stake in our economic growth. It is true that our country faces a large number of issues which need urgent resolution. The energy sector, the port sector, the transport sector, the supply of gas and coal, all need greater attention. Corruption and better governance also require firm handling. I wish to assure you that our Government is serious about tackling these issues. We are also committed to ensuring the predictability and transparency of our policy and regulatory environment.

I seek your vocal and expressed support when the Government attempts measures that you believe are in public interest. Industrial investment, and therefore industrial growth, depends heavily on the expectations of investors. I would like to use this meeting to get a sense of what in your view are the most important steps Government can take to reverse the negative mood.

We have to combat the potential impact of the global crisis and overcome the infrastructure implementation problems at home. I look forward to your suggestions on these aspects of economic management.