Prime Minister of India - Dr. Manmohan Singh

PM Inaugurates the ASSOCHAM Annual General Meeting

"I am delighted to be at your Annual General Meeting where you are discussing the impact of globalization on our people. ASSOCHAM is not only one of the oldest chambers of business in India, but it is also one of the earliest to embrace the logic of an open economy. Your leaders have been consistent in their steadfast support for liberalization of our economy. I recall the events of 1991 when we opened up our economy to greater external competition. I take this opportunity to once again express my gratitude for your support, your encouragement and your guidance to carry forward this process of liberalization.

Our country and our people are today better off as a consequence of the steps we took in 1991. It is fitting that this year, therefore your President is none other than Shri Venugopal Dhoot. His organization is the proud face of India's economic globalisation. With businesses around the world, his enterprises have become building brands of a globally competitive Indian economy and have helped to the building up of Brand India.

The important thing is that we now have scores of Dhoot families around the country in a growing range of industries and services. I have often called them the "Children of Reform". None of them had any global experience in 1991. Few had even a national presence. Within a span of one generation, many of your enterprises have emerged as national brands and global players. This is living proof of the enormous creative and business potential of the people of great country. More wealth and more employment have been created in India by Indians in the past two decades than probably in the previous two centuries.

The performance of the Indian economy, the improvement in the standard of living of our people and the decline in poverty since 1991, stand testimony to the success of the strategy we adopted at the time. There was no shortage of critics, of Cassandra's of gloom and doom. Today we all derive satisfaction and take pride in the achievements of our economy and in the fact that the people of India have risen to the challenge of globalisation in the last two decades in a handsome manner.

The world recognizes today that the Indian route to globalisation has been a more stable and sustainable route. We have avoided many of the pitfalls that other developing countries and centrally planned economies got into. The steady acceleration to 5.5% growth from 1980 to the year 2000, and to nearly 9% since 2004, bear testimony to the wisdom of the saying, "slow and steady wins the race"! The Indian tortoise will win the race against the many Asian hares!

I am also happy that in these past 17 years, despite the many changes in Government with different political parties wielding power in Delhi and in the States, there has been no reversal of the processes of economic reform and liberalization. Rather, successive Governments have taken forward the process and the Indian economy is today more globally integrated than ever before. Foreign trade now accounts for more than 40% of the GDP of our country. This ratio is higher than in the case of such developed economies as that of the United States and Japan.

Globalization is both an opportunity and a challenge. In some cases it could also pose a threat to the survival of existing forms of business organizations. In economic and social phenomena, the biblical saying 'to him that hath shall be given' has unfortunately wide applicability. As such, liberalisation of the economy has to be accompanied by purposeful state intervention to protect the weak and marginalised sections of society and in particular to help build up their capacity to share equitably in the fruits of development. In this context, great importance attaches to the growth and development of social services like education and health and to processes of skill upgradation of the Indian youth. The challenge before us is to derive the benefits of globalization, deal with its challenges and protect ourselves from the threats it also poses.

India is too big a country to remain insulated from the processes of globalization. Indeed, through all known history India has been an active participant in the processes of globalization. I do sincerely believe that the Indian people have the creativity, the skills, the enterprise and the resilience to benefit from globalization and to deal with the challenges and threats.

However, that it is incumbent on the Government to do all that it can to facilitate this process and to make globalisation a win-win game. The State has to help invest in building the capabilities of our people and our economy, to guide and assist our businesses in dealing with the opportunities and challenges they face. Our Government has paid special attention to improving the capabilities of our people and our economy in dealing with these opportunities and challenges. We have stepped up public investment in education and in infrastructure sectors. We have opened up the infrastructure sectors to Public-Private Partnership and to increased private investment.

Many sectors of our economy are today stronger and more competitive than ever before. This is why despite the global slow down and the many global challenges we face our economy is still able to deliver close to 8% growth rate. I am confident that we will be able to sustain the growth process and overcome the challenges we face on account of the global slow down.

I am, however, concerned about the impact of rising oil prices, rising commodity prices and the growing threat of protectionism from the developed economies. The unrelenting rise in crude oil prices threatens to disrupt the development process in a large number of oil importing developing countries. It can have adverse consequences for the global war against poverty. We therefore need a new global compact between oil producers and the developing world. We need global leadership. We need greater global compassion.

The processes of globalisation will also be threatened by the rise in global commodity prices, particularly food prices. Many developing countries have been forced to impose controls on commodity exports and increase subsidies on imports. Here again, we need a new global compact so that rising food prices do not threaten the process of global integration. Increased investment in agriculture and greater emphasis on new technologies to bring about a quantum jump in agricultural productivity have to figure prominently on the new global agenda for the management of an integrated globalised world economy.

At a time when we in the developing world are standing our ground in dealing with the challenges and opportunities of globalization, it is regrettable that the forces of protectionism are gaining ground in many developed countries. Developing countries like ours, recognise the importance of a liberal and rule based international trading system. We, therefore, have a stake in the successful outcome of the Doha Round of Trade Negotiations. I hope that the developed countries will not forget the development dimension of these Multilateral Trade Negotiations. It takes two hands to clap. I therefore, urge the developed economies to play the role they are expected to in sustaining global growth processes, generating new employment opportunities, opening markets and reducing global poverty.

The most important lesson of the 20th Century is that no nation is an island into itself. Building walls and looking inward does not offer a solution to the problems of growth and development. Equally pursuing beggar-thy-neighbour policies also do not offer lasting solutions. Open economies and open societies functioning within consensually arrived rules of the game alone can deal with the challenge of globalization and economic growth.

I hope your Annual General Meeting will take note of this change in the debate on globalisation. Two decades ago or even a decade ago, we in the developing world, were worried about globalisation. The voices of protectionism were heard more loudly. The voices of protectionism are now heard more vividly in developed countries. It is in the developed countries that we increasingly hear such voices. Let me emphasise that this is not just a happy reversal of the roles. There can be no reversal of the roles possible until we are able to create a more equal world. Unless we banish mass and chronic poverty from the developing world. Until the developed world is able to bridge the development divide that separates the countries of the North and the countries of the South.

Despite the impressive growth performance many newly industrialized economies and emerging markets, traditional global disparities remained a fact of life. The gap between the per capita income of the developed and developing countries remains. Global disparities are growing. Moreover, new burdens and responsibilities are sought to be imposed on developing countries in name of environment and social concerns. The time has come for the global community to take stock of the emerging situation and come forward with forward looking and equitable solutions to these problems.

At the same time, we too have our own domestic challenges to grapple with. Our Government is currently focused on reversing the recent upsurge in headline inflation rates. It has been our endeavour to tame inflationary expectations without hurting the rhythm of the growth process and also to protect the weaker sections against rising prices as far as possible. I am confident that the mix of policies we have adopted will yield results once the full impact of a normal monsoon is felt.

However, to ensure the stability and sustainability of the growth process we have to follow more prudent fiscal policies. We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity price and world oil price inflation. Economic pricing of scarce natural resources, be it water or be it oil, is essential to the sustainability of our own growth process. Upto a point we can and we have indeed insulated poorer sections of our society. Our Government has not raised the price of kerosene in the past four years. We have very marginally raised LPG and diesel prices. Even petrol prices do not fully reflect world trends. In the case of other natural resources, especially water, we have been altogether imprudent. This situation cannot continue forever. We need therefore wider political consensus to adopt more rational economic policies.

While the Government will remain engaged in stabilizing the macro-economic situation, it will also have to pay due attention to sustaining the long term growth of our economy. We have to learn to husband our fiscal resources. We have to manage our public finances more effectively. I do not wish also to see a return to the era of blind controls of the past. At the same time, we have to have the fiscal means to protect the poor from the adverse impact of inflation.

Our key priority areas have been infrastructure, agriculture and education. We have built the foundations for accelerated growth based on an architecture of inclusive growth. I am confident that the Indian economy will continue to grow at 8% to 9% rates of growth and India will emerge as one of the growth engines for the world economy as a whole.

In this process, the Indian private sector will play an increasingly important role. The creativity and enterprise of our people will continue to drive our growth process. It will be our effort and endeavour in Government to facilitate this process and provide a supportive policy environment. I am confident that India will continue to be at the top globally, among the world's fastest growing economies, characterized by moderate inflation and exchange rate stability. I hope the proceedings at your Annual General Meeting will reinforce this mood of optimism".