Prime Minister of India - Dr. Manmohan Singh

PM's speech at the India Economic summit

"I am delighted to be here at the closing session of yet another India Economic Summit. These summits have helped facilitate a dialogue between Government and business, including business leaders from outside India. Collette Mathur, Rahul Bajaj, Tarun Das, Prof. Klaus Schwab, Yogi Deveshwarji, the Confederation of Indian Industry and the World Economic Forum must be complimented for the enthusiasm with which they have organized these annual summits. I have always found the proceedings at these summits productive and useful. These summits provide an occasion for leading economic thinkers, policy-makers and industry professionals to come together, reflect on major economic trends in India and articulate issues that require urgent attention.

India has come a long way since 1985, when Prime Minister Rajiv Gandhi inaugurated the First India Economic Summit. These past two decades have been a period of great change in India, in my opinion, a change for the better. When Rajivji spoke here two decades ago he put forth a bold vision of a new India, a modern India, ready to burst into the world stage, full of energy, enterprise and dynamism. In many ways, Rajiv Gandhi was ahead of his times. His vision of a new wave of modernization captured the imagination of a new generation of entrepreneurs and professionals in all parts of our vast country.

To be sure, it was not smooth sailing. He had to reckon with vested interests; he had to contend with old mindsets; he had to convince many skeptics. He did so valiantly, with his combination of gentleness and impatience. He in many ways, symbolized the hopes and aspirations of a new generation, a generation which is now leading India's march into an exciting future, full of immense possibilities for our billion people.

In 1991, when we were given the opportunity to carry forward the programme of change, there were many skeptics in our midst, and in the audience here. I recall the concerns expressed by the "Bombay Club" about the pace of change that we tried to pursue. The concerns were about increased competition, the concerns were about exposure to global market forces, about our capacity to deal with change and about the impact on our industry and on our economy. Some of the concerns were products of old mindsets, some of them were ignorance of our own capabilities.

Today, when I look back at the past two decades, I do feel a sense of vindication. Indian enterprise has proved doomsayers wrong. What was regarded as path breaking then, is now regarded as the norm. The Indian economy has become more open, more globally integrated and more competitive. The seekers of protection then line up now seeking greater openness. Truly, times have changed; mindsets have changed; attitudes have changed; aspirations have changed; and our hopes for the future have also changed. Our industry and enterprise are far more confident, competitive and ambitious about their future and they feel that they are second to none. This is very satisfying for all of us.

Yet, we still have the skeptics, the worriers and the critics. Some have genuine concerns about change, others continue to be prisoners of the past. Today, when I look back, I am even more convinced that I was correct to observe in my first budget speech in 1991 that the idea of the emergence of India as a front ranking economic powerhouse of the world economy was an idea whose time had indeed come. I had then added, quoting Victor Hugo that no power on earth can stop an idea whose time had come. I must amend that to say that if there is any power that can still stop this idea of a resurgent India, it is ourselves. I believe that there are no external constraints now to India's growth and whatever constraints are there, are internal; constraints imposed by our polity, our social structures, our regional imbalances, our ability to handle inequity, and our ability to take hard, but essential decisions.

The last two decades have seen many ups and downs. In our pursuit of economic growth, we have made mistakes, learnt from them, refined our approaches and corrected ourselves. We have realised that growth must translate into prosperity for all. It must provide hope and opportunity for all sections of society - hope for a better future; and an opportunity to participate and benefit from processes of growth. The durability of the policies introduced in the early '90s is no longer in doubt. There have been many changes in government, but policies have remained stable, moving inexorably in a particular direction, only making marginal course corrections. We have today, a broad-based national consensus that the process of economic development and growth must enhance both - equity and efficiency.

Our government too, believes that processes of wealth creation are essential for us to meet our commitment to eradicating poverty. We are committed to creating an environment conducive to creativity and enterprise, an environment, which rewards risk-taking and innovation. It is only through this can we eradicate poverty and create jobs for millions of our youth. We need growth with equity and social justice. This is a political as well as a social imperative.

When the UPA government came to office last year, there were worries about the direction of our policies. There were worries that the economy may falter and that we may sacrifice fiscal stability. I think we have proved that the policies of the UPA government are growth-friendly. Over the past 18 months, policies relating to investment, taxation, external trade, banking & finance, Foreign Direct Investment, capital markets and small scale industries have all evolved towards making our industry and enterprises more efficient, more globally competitive and as free from restrictions as possible. We have been fiscally prudent and macroeconomic stability has been maintained without sacrificing essential expenditures on social and physical infrastructure. We have a vision of an India, which we are determined to fashion - a vision of an inclusive, prosperous, democratic, equitable India - and we are making steady progress in that direction. The direction is clearly visible and I assure you that we will not falter in this regard.

The facts so far give me confidence that we are on the right track. Our economy has been growing at an unprecedented rate. Following an 8% growth on the rebound in 2003-04, we grew by almost 7% last year and we are likely to grow by about 7.5% this year. The estimates of many economic think-tanks predict that we are likely to average 7.5% growth rate per annum in the next four years. This is impressive in itself and is based on current policies. It is certainly within the realm of possibility that an appropriate combination of policies can raise this beyond 8% easily. In fact, we should be targeting a 10% growth rate in 2-3 years' time. In my view, this is eminently feasible, if we have the expected increase in our savings rate and arising out of a young population, if we manage to make a quantum leap in the growth rate of our agriculture, if investment in infrastructure provides a fresh impetus to industry and if services continue with their impressive performance. The problem areas are known and we are determined to make concrete efforts to move forward on all these fronts.

On the external front, we have become actively engaged with the world economy. Our tariff levels are coming down and we are committed to bringing them down to ASEAN levels. In addition to a pro-active role at the WTO, where we are attempting to dismantle barriers to agricultural trade, we are actively pursuing regional trading arrangements. We have concluded Free Trade Agreements in SAARC and with Singapore and Thailand. We are on the verge of entering into one with the ASEAN countries next month. I am certain that in the next few years, we may see the rise of a major free trade area in Asia covering all major Asian economies, including China, Japan and South Korea and possibly extending to Australia and New Zealand. This Pan-Asian Free Trade Area could be the third pole of the world economy after the European Union and North Atlantic Free Trade Area and will, I am certain, open up new growth avenues for our own economy.

Internally, we are trying to systematically address the problem areas where we still need to eliminate bottlenecks and unlock their true potential. Take agriculture - this is a sector, which has been under-performing, in the recent past. Agriculture is the lifeblood of our country. The livelihood and economic well-being of the majority of our people depend on this sector. The key to their prosperity - and the prosperity of the entire nation depends critically on transforming and rejuvenating our agriculture. To my mind, given this centrality of agriculture to our economy and society, the key breakthroughs that we have to make in our country to spread the benefits of economic reform, lie in the area of agriculture.

While the Tenth Five Year Plan assumed that agricultural production would grow at the rate of 4.0%, the reality is that in the past first three years of the Plan, we have not been able to ensure even 2% rate of growth in agriculture. We have made serious attempts to increase public investment in irrigation. We are now investing heavily in horticulture through the National Horticulture Mission. We are focusing on technological breakthroughs for scaling up yields. I am convinced that our farmers, like our industrialists are among the best in the world and can compete with the best. If we have faith in this, we should work towards liberating Indian agriculture from controls that shackle its potential. We have nudged many states into amending the Agriculture Produce Marketing Committee Acts and removing constraints on agricultural trade. An Integrated Food Law, transferable warehouse receipts and a Forward Market in commodities, along with amendments to the Essential Commodities Act are major steps towards having a single integrated market for agriculture in India. I see immense opportunities for private enterprise in the transformation of agriculture. There are opportunities both for supplying inputs and for processing and marketing the agricultural produce. Agricultural growth is slowly responding to our incentives and if we sustain our efforts, we may see India becoming a new granary of the world. The private sector must not miss out on this opportunity and must ride the boom that I see now on the horizon.

Closely linked to the fortunes of agriculture is the condition of our rural areas. It is essential that our rural areas have not only basic amenities, but also infrastructure, which can support more intensive economic activity. Rural infrastructure must become a facilitator for integrating our rural hinterland into our fast growing economy. We have announced a comprehensive programme for rural infrastructure development under the umbrella of "Bharat Nirman". Through this time-bound programme, we will achieve a quantum jump in housing, road connectivity, water supply, electrification and telecom connectivity in our rural areas. We will bring in an additional 1 crore, 10 million hectares under irrigation.

We also recognise that urban areas are focal centres for economic activity and their needs must be attended to on a priority basis. Our cities, which shelter a third of our population need a better future. The speed at which urbanization is now taking place, the day is not far off when over 50% of India's population will be residing in urban areas. Urban areas are the nodes from which enterprise, creativity and prosperity radiate in all directions. They are the engines of sustained growth that can absorb the millions of people who need to be gainfully employed outside agriculture. They need infrastructure, which is world class, infrastructure, which can cater to the needs of a rising population, infrastructure that can propel industrial and economic growth. The Jawaharlal Nehru National Urban Renewal Mission which is being formally launched later this week will cater to the infrastructure needs of the top sixty urban agglomerates. Through this Mission, in which the Central Government will invest over Rs 50,000 crores, with much more coming from states and local bodies, we will be able to finance urban transport projects, slum development projects and urban decongestion projects. We have however, linked funding to taking some basic actions such as improving municipal bodies, their functioning, removing land ceiling and rent control legislation and rationalising stamp duties. I am confident that in the coming 2-3 years, we will see a robust process of urban renewal visible all over our country.

Many of my ministerial colleagues must have spoken to you about the challenges posed by the so called 'infrastructure deficit'. This area, apart from agriculture, is the one, which has been gaining our attention most. We have set up a Special Purpose Vehicle for raising dedicated long-term funds for financing infrastructure. We have moved away from a government-centered approach to a public-private partnership approach. We have developed transparent, competitive procedures for such partnerships, which would function on commercial lines. We have established a viability gap funding mechanism for making these projects commercially viable. I am certain that we are now at the take-off point in infrastructure. All the elements of an essential institutional framework are now falling in place. If the private sector seizes the initiative, the sky is the limit to what we can achieve in this vital area of national endeavour.

The roads sector is humming with activity. We have moved away in the last one year from the earlier contractor-driven approach of National Highway Authority of India to a Build-Operate-Transfer driven approach. We expect an investment of over Rs 1, 70,000 crores in the National Highway Development Project programme in the next 7 years. Our airports are buzzing with flights. There are so many players now that I often cannot recognise the logos of airlines in our domestic airports. Airports too are getting modernised. Mumbai and Delhi airports are on track to be the global traffic hubs, with the Hyderabad and Bangalore airport projects providing healthy competition. New private sector ports are being developed and more are in the pipeline. The railways are not only performing admirably in their operations, but have an ambitious freight corridor project. This ambitious Rs 25,000 crore project will be a boon for our freight traffic. We will soon be having more competition to CONCOR in container movement. The telecom sector has anyway done us all proud and has revealed our intrinsic entrepreneurial strengths. The power sector continues to be plagued with complex problems, but we are determined that we will set many things right in the coming months. I am personally holding wide consultations to remedy the situation in the area of power supply.

I have often heard complaints from many corners that we have not made progress in our FDI policy. In fact, my own assessment is that today, we have one of the most liberal FDI regimes in the world. We have unshackled FDI policies in telecom, publishing, real estate and in asset reconstruction firms in the last couple of months. The troublesome Press Note 18 has been done away with. Barring the financial, retailing and coal mining sectors, we are extremely liberal in welcoming FDI. There is a Group of Ministers, which is examining ways of rationalising the current FDI regime so that there is less red tape. Sometimes, I do recognize our ability to create bureaucratic hurdles in the way of enterprise amazes me. I think that as far as FDI is concerned, it is not policy, but badly designed procedures and poor infrastructure, which are today the most important constraint. As for FDI in retail, we are engaged in an intellectually stimulating exercise to understand the possibilities that exist in opening up this sector and how best we can harness it for our needs.

We have to create close to ten million jobs every year for the next few years to meet the demand for jobs that new generations of the workforce will seek. Most of these jobs will be sought by unskilled labour. We have therefore, to create employment opportunities for them in infrastructure, in manufacturing, in trade and transport. These jobs will be created only if we make it attractive for investors to invest in labour-absorbing technologies and labour-using sectors. We will try for a consensus on making labour markets more flexible, while having credible social safety nets.

When I read the debate in the media on our policies, I notice an incomplete appreciation of the steps being taken by our government to ensure that economic growth is firmly rooted in an equitable, just society. This is essential if growth is to be sustained and if society has to grow and prosper in harmony. The Rural Employment Guarantee Act and the massive increase in investment in health and education are a product of our realisation that in the long run, if growth is not to splinter our society, we must invest in the skill base of our people and in adequate social safety nets for the less well-off and deprived citizens of our ancient land. We have ambitions of being an economic superpower. This cannot be on a base where half our people are literate; where people do not have access to basic health facilities; where people do not have incomes in times of distress. In the long run, we must carry everyone along on this road to national prosperity. This is our vision for India. This must be your vision for India too.

The new India that was stirred in the 1980s showed that it was ready to be different, once again. Indian enterprise has proved to the world that it is capable of taking on competition when it sets out to do so. In 1985, when your first Summit met, no one had even heard of Infosys, or Wipro, no one had imagined that an Indian would become the Steel Czar of the world, no one had imagined that a Telco car would compete with the Japanese car. We now have a track record of success in some vital areas to feel confident that we can replicate these success stories in other sectors. Why should we then be gripped by diffidence? Why should we still live in fear of globalisation?

The experience of the past two decades should give us ample confidence, it should give us courage, it should make us bolder, it should make us think big. That sense of confidence must reflect itself in bolder initiatives. It must encourage us to be more open and less controlled. It must give us confidence to pursue change in areas where we have shied away from change. Be it in urban governance, be it in rural marketing, be it about labour laws. We need growth, we need jobs, we need incomes, we need security. The India we dream of will provide for this. Our government is determined to fashion such an India. I am sure all of you will join in this new voyage of enterprise and creativity. If not, history will judge us harshly for not making bold to make it happen."